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TEffi  LffiRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

IRVINE 


GIFT  OF 

MRS.   HELEN  SMITH 


http://www.archive.org/details/cooperationinagrOOpoweiala 


Zbc  TRural  Science  Series 

Edited  by  L.  H.  BAILEY 


COOPERATION  IN  AGRICULTURE 


Ubc  IRural  Science  Series 

The  Soil.    King. 

The  Horse.    Roberts. 

The  Spraying  of  Plants.    Lodeman- 

How  to  Choose  a  Farm.    Hunt. 

Milk  and  Its  Products.   Wing.    Enlarged 

Forage  Crops.     Voorhees. 

and  Revised. 

Bacteria  in  Relation  to  Country  Life. 

The  Fertility  of  the  Land.    Roberts. 

Lipman. 

The     Principles    of     Fruit-Growing. 

The  Nursery-Book.    Bailey. 

Bailey. 

Plant-Breeding.    Bailey.    4th  Edition, 

Bush-Fruits.    Card. 

revised. 

Fertilizers.     Voorhees. 

The  Forcing-Book.    Bailey. 

The  Principles  of  Agriculture.    Bailey. 

The  Pruning-Book.     Bailey. 

15th  edition,  revised. 

Fruit-Growing  in  Arid  Regions.    Pad- 

Irrigation and  Drainage.    King. 

dock  and  Whipple. 

The  Farmstead.    Roberts. 

Rural  Hygiene.     Ogden. 

Rural    Wealth    and    Welfare.      Fair- 

Dry- Farming.     Widtsoe. 

child. 

Law  for  the  American  Farmer.    Green. 

The  Principles  of  Vegetable-Garden- 

Farm Boys  and  Girls.    McKeever. 

ing.    Bailey. 

The  Training  and  Breaking  of  Horses. 

Farm  Poultry.    Watson.    Enlarged  and 

Harper. 

Revised. 

Sheep-Farming    in    North    America. 

The  Feeding  of  Animals.    Jordan. 

Craig. 

The    Farmer's    Business    Handbook. 

Cooperation  in  Agriculture.    Powell. 

Roberts. 

The    Farm    Woodlot.       Cheyney    and 

The  Diseases  of  Animals.    Mayo. 

Wentling. 

PLATE   1.  — Packing-houses  for  Oranges.     Chapters  IV,  VIII. 


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An  Obange  Packing-house.    Riverside,  California. 


COOPERATION  IN  AGRICULTURE 


BY 

G.  HAROLD  POWELL 

eENERAL   MANAGER    OF    THE    CALIFORNIA    FRUIT    GROWERS'    EXCHANGE 
FORMER  ASSISTANT    CHIEF   OF   THE    BUREAU   OF   PLANT   INDUSTRY 
AND    FORMER    POMOLOGI8T    IN    CHARGE    FRUIT    TRANSPOR- 
TATION   AND     STORAGE     INVESTIGATIONS,     UNITED 
STATES  DEPARTMENT    OF    AGRICULTURE 


THE  MACMILLAN   COMPANY 

1918 

AU  rights  reserved 


?7 


COPYBIGHT,  1913, 

;Bt  the  MACMILLAN  COMPANY. 


Set  up  and  elcctrotyped.     Published  April,  1913.     Reprinted 
September,  1913;  June,  1914;  July,  1915;  March,  July,  1917. 


Nodnoatr  ^rres 

J,  8.  Gushing  Co.  —  Berwick  <fe  Smith  Co. 

Norwood,  Mass.,  U.S.A. 


PREFACE 

This  volume  is  intended  as  a  discussion  of  the  principles 
that  underlie  the  organization  and  management  of  the  Amer- 
ican cooperative  associations  in  agriculture.  The  application 
of  the  methods  of  cooperation  to  the  production,  handling, 
distribution,  and  sale  of  farm  crops  and  to  other  agricultural 
activities,  is  commanding  the  attention  of  farmers,  legis- 
lators, and  economic  investigators  throughout  the  United 
States  and  Canada. 

The  American  cooperative  movement,  even  in  the  oldest 
cooperative  organizations,  is  in  the  formative  stage.  The 
principles  of  cooperation  are  not  generally  understood,  and 
few  persons  appreciate  the  difference  between  a  cooperative 
organization  formed  for  the  benefit  of  its  members,  and  a 
corporation  formed  for  pecuniary  profit.  The  so-called 
cooperative  associations  in  the  United  States  and  Canada 
have  usually  been  formed  as  corporations  for  profit,  and  do 
not  differ  in  principle  from  the  ordinary  stock  corporations, 
although  an  effort  has  often  bee  a  made  by  the  organizers  to 
conduct  them  along  cooperative  lines. 

The  development  of  the  agricultural  cooperation  move- 
ment needs  to  be  preceded  in  most  of  the  states  by  legisla- 
tion that  will  permit  the  formation  of  non-profit  cooperative 
associations  or  the  formation  of  profit  corporations  that  can 
be  operated  legally  for  the  benefit  of  the  members. 

The  writer  has  discussed  some  of  the  legal  questions  in- 
volved, the  financing  and  management  of  such  organizations 


vi  Preface 

as  they  have  appeared  to  him  as  the*  result  of  experience, 
and  a  general  study  of  the  cooperative  question.  These 
principles  are  then  illustrated  by  showing  how  they  are 
applied  to  certain  agricultural  crops,  such  as  animal  and 
plant  improvement,  the  handling  of  grain  and  dairy  prod- 
ucts, cotton  and  grain,  the  distribution  and  sale  of  crops, 
and  the  cooperative  purchase  of  supplies.  The  application 
of  the  cooperative  method  to  rural  credit,  irrigation,  the 
telephone,  and  insurance  is  also  briefly  discussed. 

It  is  not  attempted  to  cover  the  entire  agricultural  coop- 
erative movement  in  America  in  this  discussion.  There  are 
thousands  of  cooperative  societies  in  the  United  States  and 
Canada,  and  an  enumeration  of  their  activities  would  make 
a  volume  far  beyond  the  limits  of  this  discussion. 

G.    HAKOLD  POWELL. 
Los  Anoblbs,  Cal., 
February  1,  1913. 


CONTENTS 


CHAPTEK  I 


CHANGES  IN  INDUSTRIAL  METHODS   (Page  1) 

Changes  in  Labor  Methods  .... 

Readjustment  in  Agriculture  has  been  Slow 

Industrial  Methods  Difficult  to  apply  to  Agricult 

The  Independence  of  the  Farmer 

Prosperity  of  the  American  Farmer 

The  Economic  Loss  in  Rural  Efficiency 

Dissatisfaction  among  the  Farmers 

Efforts  towards  Organization 

Need  of  Better  Business  and  Better  Farming 

Organization  Methods  still  Experimental 


FASB 

8 

4 

4 

6 

6 

8 

10 

11 

13 

16 


CHAPTER   II 


FUNDAMENTALS  IN  COOPERATION  (Page  18) 

The  Unit  must  lie  in  a  Restricted  Area        .....  19 

Agricultural  Organization  must  be  Born  of  Necessity  ...  21 

The  Organization  should  be  Cooperative  in  Form        ...  24 

The  Membership  in  a  Farmers'  Organization       ....  25 

The  Voting  Power  of  Members 27 

The  Membership  Agreement 29 

A  Citrus  Fruit  Membership  Agreement,  as  an  Illustration    .  32 

Management 36 

Difficulties  in  Management 37 

vii 


viii  Contents 

CHAPTER  III 

LEGAL  FEATURES  OF  COOPERATIVE  ORGANIZA- 
TIONS IN  AGRICULTURE   (Page  40) 

PAOB 

The  Difficulty  of  organizing  under  Present  Laws         ...  42 

New  Legislation  needed 44 

The  Wisconsin  Law       .........  45 

The  Nebraska  Law 46 

The  California  Law 46 

Principles  to  be  included  in  New  Laws 50 

CHAPTER  IV 

THE  ORGANIZATION  OF  A  FARMERS'  COOPERA- 
TIVE ASSOCIATION    (Page  52) 

Charter  of  a  Citrus  Fruit  Association 52 

The  By-laws 55 

The  Federation  of  Co5perative  Associations         ....  64 
Necessity  of  a  Federation  of  Associations  for  handling  Farm 

Products 66 

Cooperative  Organization  of  the  Federation  ....  67 

Necessity  of  preserving  the  Individuality  of  the  Associations  68 

The  Organization  of  a  Federation 70 

Cooperative  Associations  and  Public  Policy  Questions  .        .  73 

The  Citrus  Protective  League  of  California  ....  75 


CHAPTER  V 

FINANCING  A   COOPERATIVE   ORGANIZATION 
(Page  78) 

Citrus-fruit  Organizations 78 

Annual  Financing 79 

Difficulties  in  Financing 81 

The  Payment  of  Dividends .83 


Contents  ix 
CHAPTER  VI 

BREEDERS'  AND  GROWERS'  ASSOCIATIONS  (Pagb  87) 

FAGB 

Cooperative  Cow-testing  Associations 89 

The  Danish  Example 89 

The  Plan  of  a  Cow-testing  Association 91 

Articles  of  Agreement  in  a  Cow-testing  Association     ...  93 

The  Cooperative  Breeding  of  Live-stock 94 

Cooperative  Cattle-breeding  in  Denmark       ....  95 

Cooperative  Cattle-breeding  in  the  United  States  ...  97 

In  Wisconsin 98 

Cooperative  Cattle-breeding  by  the  Federal  Government, 

the  State,  and  the  Farmers  in  Minnesota         .        .  99 

Cooperative  Horse-breeding 106 

The  Company  System  of  Horse-breeding        .        .        .  106 

Cooperative  Crop  Improvement 109 

Organization  for  Crop  Improvement Ill 

Corn-breeding  Associations 112 

Plans  of  the  Illinois  Corn-breeders'  Association     .        .  115 


CHAPTER  VII 

COOPERATION  IN  THE  HANDLING,  DISTRIBUT- 
ING, AND  SALE  OF  FARM  PRODUCTS,  AS 
ILLUSTRATED  IN  GRAIN,  DAIRY  PRODUCTS, 
EGGS,   AND  COTTON    (Page  120) 

The  Farmers'  Cooperative  Grain  Elevators 122 

The  Grain-distributing  System 123 

The  Method  of  selling  the  Grain 124 

Origin  of  the  Farmers'  Elevators 124 

The  Plan  of  a  Farmers'  Elevator  Company  ....  128 

A  Constitution  and  By-laws  of  a  Farmers'  Elevator  Company  132 

Cooperation  in  the  Manufacture  of  Butter 135 

Organization  of  a  Creamery 187 


Contents 


Organization  Agreement    .... 

The  Status  of  the  American  Creamery  . 

The  Centralizer  Creameries  .... 

A  Business  System  for  Cooperative  Creameries 

A  Cooperative  Dairy  Federation  in  Minnesota 

The  Creamery  as  a  Center  for  Rural  Improvement 
Cooperation  in  the  Distribution  and  Sale  of  Milk 

The  Organization  of  Milk  Producers 

The  New  York  Dairymen's  League 
The  Egg  Business        .        .         .... 

From  the  Country  Merchant  to  the  Packing-house 
Some  of  the  Remedies  for  the  Egg  Situation 

Changes  in  the  Methods  of  the  Small  Egg-buyer 

Buying  Eggs  by  Quality,  not  by  Count 

Refrigerated  Receiving  Stations    . 

Care  of  Eggs  at  the  Source  of  Production 
Marketing  Eggs  through  the  Creamery 

Advantages  of  this  System  of  Handling  Eggs 

Conclusion  on  Handling  of  Eggs  through  Creamery 
Co6peration  in  the  Handling  of  Eggs  in  Other  Countries 
Cooperation  in  the  Cotton  Industry 

Conditions  surrounding  the  Cotton  Industry 

The  Cotton-distributing  System     . 

The  Dissatisfaction  of  the  Cotton  Farmer 

The  Farmers'  Union      .... 

The  Charter 

Principles  of  the  Union  ... 
Membership  in  the  Union 

Efforts  of  Growers  to  reduce  the  Acreage  of  Cotton 

The  Maintenance  of  Prices  by  Organizations  of  Cotton  Pro- 
ducers ...... 

The  Efiect  of  the  Farmers'  Organization  on  the  Price  of 

Cotton 

"Warehouse  Policy  of  Farmers'  Union 

Economic  Mistakes  of  the  Cotton  Growers 


Contents  xi 
CHAPTER  VIII 

COOPERATION  IN  THE   HANDLING,   DISTRIBUTING, 
AND  SALE  OF  FRUIT  (Page  197) 

PAGK 

The  Fruit-distributing  System 198 

Agencies  of  Distribution 199 

Tiie  Broker 199 

Fruitr-distributing  and  Marketing  Corporations       .         .  200 

The  Jobber      , 201 

The  Commission  Merchant 201 

The  Auction  Company 202 

The  Warehouseman 203 

The  Retail  Trade 204 

Abuses  in  the  Fruit  Trade 206 

The  Handling  of  the  Fruit  Crop  by  Cooperative  Associations      .  212 

Bad  Handling  and  the  Fruit-rots 213 

Cooperation  in  the  Harvesting  of  Fruit 216 

The  Remedy  for  Decay  in  Citrus  Fruits        ....  216 

Cooperation  in  the  Grading  and  Packing  of  Fruit          .         .  218 

Methods  of  insuring  Uniformity  in  Grading  and  Packing      .  220 

The  Hood  River  Apple-growers'  Union          ....  221 

Constitution  and  By-laws  •        .        .        .       -.        .        .  222 

The  Central  Packing- house 226 

The  Pooling  of  Fruit 227 

Cooperative  Cold-storage  Plants 231 

Cooperation  in  the  Distribution  and  Sale  of  Fruit        .        .        .  234 

The  Associated  Methods  of  Selling  Fruit        ....  235 

A  Small  Association 236 

A  Large  Volume  of  Business 236 

Perishable  Fruit 237 

Fruit  with  Long-keeping  Qualities 238 

The  Citrus  Fruits  of  California 239 

Selling  the  California  Citrus-fruit  Crop 241 

The  California  Fruit-growers'  Exchange        ....  241 

The  Local  Associations 242 


xii  Contents 

rASB 

The  District  Exchange 248 

The  Central  Exchange 248 

Fixing  a  Price 246 

■    Present  Coopei-ative  Methods  of  Citrus  Distribution      .        .  247 

The  Cooperative  Distribution  and  Sale  of  Other  Farm  Products  .  248 

CHAPTER  IX 

COOPERATION  IN  THE    PURCHASE   OF  SUPPLIES 
(Page  250) 

The  Organization  of  a  Supply  Company 260 

Method  of  selling  Supplies  to  the  Members 252 

A  Fruit-growers'  Supply  Company 254 

CHAPTER  X 

COOPERATION  IN  IRRIGATION  (Page  268) 

Progress  of  Cooperative  Irrigation  Enterprises     ....  259 
Methods  of  Organizing,  Financing,  and  Operating  Water  Compa- 
nies in  Southern  California 261 

CHAPTER  XI 

RURAL  CREDIT   (Pagb  271) 

National  Interest  in  Rural  Credit 272 

Cooperative  Credit  Unions  in  the  United  States  ....  274 

The  Jewish  Credit  Unions 274 

The  Cost  of  Credit  to  the  American  Farmer         .         .        .        .277 

The  Individual  Credit  System 278 

The  Crop  Lien 279 

The  Store  Credit  System 280 

Bank  Credit 282 

The  Need  of  a  Better  Rural  Credit  System 283 

The  Raiffeisen  Banks 286 

Organization  and  Management 287 


Contents  xiii 


FAOK 


The  Working  Capital 287 

The  Loaning  of  Mone 288 

The  Federation  of  Raiffeisen  Banks 289 

The  Schulze-Delitzsch  Banks 290 

The  Working  Capital 291 

The  Landschaften 291 

The  New  Landschaften 294 


CHAPTER  XII 
THE  RURAL  TELEPHONE    (Page  299) 

CHAPTER   XIII 

MUTUAL  INSURANCE   (Page  308) 

A  Plan  for  a  Mutual  Insurance  Company 309 

The  Strength  of  the  Mutual  Insurance  Associations     .        .        .311 
State  Mutual  Associations 313 


BIBLIOGRAPHY  (Page  317) 

General  References 322 

Cow  Testing  and  Breeding 324 

Creameries 324 

Dairying 324 


LIST  OF  ILLUSTRATIONS 


Plate 


Plate  II. 
Plate  III. 
Plate  IV. 


Plate   V. 

Plate   VI. 
Plate  VII. 


Plate  VIII. 
Plate  IX. 
Plate   X. 


Plate  XI. 
Plate  XII. 


Plate  XIII. 
Plate  XIV. 

Plate    XV. 
Plate  XVI. 


Packing-houses  for  Oranges     .        .        .      Frontispiece 
A  Modern  Orange  Packing-house. 
An  Orange  Packing-house,    Riverside,  California. 

FACING   PAGE 

20 
40^ 


Orange  Packing-house.     Pasadena,  California 
Interior  of  Orange  Packing-house.     California 
Orange  Packing-house  and  Equipment    . 

Orange  Packing-house.     Redlands,  California. 
Orange  Grading-table  and  Sizing-machine. 
Interior  of  Orange  Packing-house.    Showing  Sizing- 
machines  ........ 

Electrical  Orange  Weighing-machine 
Types  of  Citrus  Fruit  Packing-houses 

Lemon  and  Orange  Packing-house.     Riverside, 

California. 
Lemon  Packing-house.     Upland,  California. 
Lemon  Packing-house.     Santa  Paula,  California  . 
Lemon  Washing-machines       ..... 

Curing-tents  for  Lemons 

Lemon  Curing-tents,  Showing  Fruit  Stored  in 

Boxes. 
Lemon  Curing-tents,  Showing  Fruit  Stacked  in 
Trays. 

Lemon  Grading  and  Packing 

Trucks  for  Use  in  Citriis  Fruit  Packing-houses 
Trucks  Used  in  Movement  of  a  Stack  of  Lemon 
Trays. 
Oranges  Exposed  for  Sale  at  Auction.     New  York  . 
Buyers  Examining  Citrus  Fruit  at  Auction.     New 

York 

Cooperative  Creamery.     Hutchinson,  Minnesota    . 
Farmers'  Cooperative  Grain  Elevators    . 


60 


80 
100 
120 


140 
160 
180 


200 

220 


240 

260 
280 
300 


COOPERATION  m  AGRICULTURE 

CHAPTER  I 

CHANGES  IN  INDUSTRIAL  METHODS 

In  the  last  few  decades,  the  industrial  horizon  of  this 
country  has  been  rapidly  widening.  Fifty  years  ago,  the 
outlook  of  the  American  was  bounded  by  his  home  and 
his  community;  his  capital  was  small,  his  business 
interests  were  equally  limited.  But,  during  the  period 
of  the  Civil  War,  mechanical  invention  was  greatly  stim- 
ulated and  this  was  correlated  with  rapid  progress  in 
manufacturing  and  in  foreign  and  domestic  commerce. 
The  telegraph,  the  telephone,  the  steamship,  the  modem 
locomotive,  together  with  the  Bessemer  steel  rail  and  the 
wireless  telegraph,  have  displaced  the  personal  mes- 
senger and  the  stage-coach  and  the  sailing  vessel,  and 
have  brought  the  whole  world  into  instant  communica- 
tion. 

The  last  generation  has  been  primarily  the  age  of  the 
inventor,  and  not  only  of  mechanical  appliances,  but  of 
business  methods  as  well.  Combinations  in  all  kinds  of 
business  have  been  formed,  capital  has  been  concentrated 
around  gigantic  undertakings,  various  systems  of  credit 
have  been  developed,  and  instruments  of  business  devised 
to  extend  the  influence  and  power  of  capital  and  of  those 


2  Cooperation  in  Agriculture 

who  control  it.  These  changes  have  been  accompanied 
by  equally  striking  modifications  in  the  developing  of  the 
industries  themselves.  In  the  earlier  period,  the  indi- 
vidual was  self-sufficing.  He  lived  and  supported  his 
family  on  the  products  of  his  labor.  Then,  as  communi- 
cation was  extended,  social  life  and  the  industrial  system 
became  more  complex,  competition  more  acute,  and 
individuals  joined  successively,  until  prevented  in  some 
cases  by  the  courts,  in  partnerships,  joint-stock  com- 
panies, industrial  pools,  trusts,  holding  companies  and 
mergers,  each  combination  forming  a  system  under  which 
it  was  supposed  at  that  time  the  evolution  of  industrial 
pursuits  could  best  proceed.  At  the  present  time,  mod- 
em industry  is  completely  dominated  by  large  aggrega- 
tions of  capital.  Competition  is  being  gradually  sup- 
pressed and  business  thoroughly  organized  and  equipped 
through  the  concentration  of  capital  imder  a  growing 
legal  regulation  for  its  development  and  protection.  In 
consequence,  the  problems  arising  out  of  the  concentra- 
tion of  capital  and  the  relation  it  should  bear  to  com- 
petitors, to  the  state,  and  to  the  individual  have  become 
the  leading  questions  of  public  policy.  Under  these 
conditions,  the  individual  holds  a  new  relationship  to 
business  and  to  society.  Instead  of  living  on  the  product 
of  his  labor  as  he  formerly  did,  he  lives  on  its  profits. 
In  place  of  transacting  business  man  to  man  as  his  father 
did  before  him,  he  has  become  a  more  or  less  important 
part  of  the  scheme  of  modem  industriahsm.  He  is  no 
longer  isolated.  He  is  a  link  in  the  modem  industrial 
and  social  chain  with  a  corresponding  influence  and 
responsibility. 


Changes  in  Industrial  Methods  3 

The  changes  which  have  been  noted  have  taken  place 
more  rapidly  in  the  secondary  industries  such  as  lumber- 
ing, transportation,  and  ordinary  commercial  pursuits 
than  in  primary  industries  which,  like  agriculture,  depend 
more  upon  the  labor  of  the  individual  than  upon  the 
organization  and  arts  of  man.  Capital  has  not  been 
concentrated  in  agriculture;  it  has  instead  accumulated 
in  the  towns  and  cities,  where  it  has  organized  and  feder- 
ated itself  into  trade  and  with  legislation  to  develop  to 
the  highest  extent  its  own  interests. 

CHANGES  IN  LABOR  METHODS 

These  changes  have  affected  the  laboring  man  as 
vitally  as  they  have  the  capitalistic  interests.  The  la- 
borer cannot  deal  as  an  individual  with  organized  capital 
and  adequately  protect  himself,  for  under  present  indus- 
trial conditions,  the  barrier  between  his  employer  and  him- 
self is  almost  insurmountable.  The  capitalization  of 
industry,  therefore,  has  forced  the  laboring  men  to  organize 
into  labor  unions,  trades  unions,  and  industrial  unions, 
and  to  amalgamate  or  federate  these  separate  units  into 
larger  central  organizations,  the  purpose  of  which  is  to 
protect  the  interests  of  the  members  in  dealing  with 
their  employers,  to  develop  favorable  labor  legislation,  to 
protect  themselves  against  unjust  laws,  and  to  bring 
about  a  relationship  between  themselves,  their  employers, 
and  society  which  will  enable  them  and  their  families 
to  share  more  fairly  in  the  general  prosperity  to  which  their 
labor  contributes.  Like  the  concentration  of  capital, 
the  organization  of  labor  has  almost  eliminated  free 
competition  from  its  ranks  and  has  been  carried  to  a  point 


4  Cooperation  in  Agriculture 

where  its  relations  to  capital  and  to  society  have  become 
a  grave  question  of  public  policy. 

READJUSTMENT   IN   AGRICULTURE  HAS   BEEN   SLOW 

The  American  farmer  has  adjusted  himself  more  slowly 
to  these  industrial  and  social  changes  than  either  capital 
or  labor.  The  reasons  for  this  are  partly  inherent  in 
the  man  who  works  on  the  land  and  partly  in  agriculture 
itself.  The  farmer  is  both  a  capitalist  and  a  laborer  and 
usually  not  a  specialist  in  either.  His  capital  is  compara- 
tively small.  He  is  seldom  skilled  in  the  art  of  dealing 
with  men  or  with  modem  industrial  methods ;  he  is  not 
primarily  a  business  man.  He  is  more  or  less  isolated. 
Compare  him  with  the  capitalist  or  the  laborer  and  it 
will  be  seen  that  his  vocation  makes  him  more  self-de- 
pendent than  either.  His  daily  routine  centers  around 
his  family  and  the  upbuilding  of  the  home,  rather  than 
around  the  operations  of  other  people  or  the  industrializ- 
ing of  his  farming  operations.  He  is  naturally  conserva- 
tive. The  average  individual  farmer  who  is  able  and  intel- 
ligent can  succeed  at  all  times  without  concerted  action  with 
other  farmers,  while  the  success  of  the  individual  laborer 
or  the  small  capitalist  in  later  days  has  been  more  difficult 
of  attainment  unless  strengthened  by  thorough  organiza- 
tion and  the  federation  of  similar  interests. 

INDUSTRIAL   METHODS    DIFFICULT    TO    APPLY   TO    AGRICUL- 
TURE 

The  average  farmers  are  not  even  specialists  in  farm- 
ing.    They  produce  a  variety  of  general  crops,  each  having 


Changes  in  Industrial  Methods  5 

to  be  handled  and  marketed  through  different  agencies. 
The  suppUes  which  they  use  are  variable  and  are  secured 
from  different  sources.  It  is  only  when  they  become 
specialists  in  a  crop  in  which  a  large  community  is  in- 
terested, like  apples,  oranges,  tobacco,  potatoes,  or  cotton, 
and  have  to  develop  special  facilities  for  the  handling  and 
distribution  of  the  crop,  that  a  group  of  farmers  have  a 
common  purpose  comparable  to  the  aims  of  a  large  manu- 
facturer or  to  those  of  a  trade  or  industrial  union.  Under 
these  conditions,  the  farmers  do  have  common  problems 
to  meet.  They  are  confronted  with  similar  questions 
of  public  policy,  they  purchase  similar  supplies,  they 
seek  similar  markets,  they  have  to  face  the  same  ques- 
tions of  production,  of  transportation,  of  distribution, 
and  of  sale.  They  are  thereby  placed  in  a  position  where 
their  business  lend^  itself  to  organization  in  order  that 
methods  may  be  improved,  production  cheapened,  and 
that  there  may  be  brought  about  a  better  handling,  dis- 
tribution, and  marketing  of  their  crops  and  an  improve- 
ment in  their  relations  with  other  industries.  It  is,  there- 
fore, a  diflEicult  matter  to  apply  to  agriculture  in  general 
such  business  methods  as  have  been  developed  in  the 
secondary  industries,  or  such  as  have  contributed  to  the 
progress  of  the  American  laborer.  It  will  be  shown  in 
later  chapters  that  the  methods  of  organizing  capital  and 
labor  are  not  always  adapted  to  the  organization  of  rural 
problems  and  that  the  progress  of  the  American  farmer, 
in  so  far  as  it  springs  from  the  development  of  better  busi- 
ness methods,  must  follow  the  adoption  of  practices  that 
can  be  applied  to  the  business  management  of  the  farm 
and  to  the  organization  of  agricultural  industries. 


6  Cooperation  in  Agriculture 

THE  INDEPENDENCE   OF   THE   FARMER 

There  are  conditions  among  farmers  other  than  those 
ah-eady  mentioned  that  make  the  organization  of  their 
economic  relationships  difficult  of  accomplishment,  not 
the  least  of  which  is  the  independence  of  the  farmer  him- 
self. For  generations,  the  tiller  of  the  soil  was  self-suffic- 
ing and  was  bred  and  trained  to  depend  on  his  own  efforts. 
As  a  result  of  his  heredity,  his  experience,  his  environ- 
ment, and  of  his  necessities,  he  is  slow  to  delegate  authority 
over  his  interest  to  any  one.  Dealing  with  complicated 
economic  problems  or  with  men  has  not  been  a  part  of 
his  inheritance  or  of  his  experience,  and,  not  being  skilled 
in  these  arts,  he  underestimates  the  grade  of  ability  needed 
to  manage  a  business  agricultural  organization  with  which 
he  may  become  identified,  nor  is  he  inclined  to  cooperate 
with  others  in  solving  common  problems.  He  is  likely  to 
be  suspicious  of  the  business  dealings  of  his  neighbors. 
In  the  past,  these  difficulties  have  prevented  the  forma- 
tion of  many  agricultural  associations  and  have  wrecked 
others  that  have  been  formed ;  though  these  conditions 
are  gradually  improving  as  agriculture  becomes  more 
specialized  and  commercialized,  as  the  farmer  becomes 
more  experienced  in  business  matters,  and  as  the  social 
and  economic  relations  of  the  farmer  grow  more  complex. 

PROSPERITY   OF  THE  AMERICAN   FARMER 

As  a  class,  the  American  farmers  have  been  very  pros- 
perous in  the  last  twenty  years.  They  have  been  reap- 
ing the  rewards  of  better  farming,  and  of  a  prosperity 


Changes  in  Industrial  Methods  7 

that  has  been  general.  As  Professor  Bailey  says  in  "The 
State  and  the  Farmer,"  good  farmers  are  better  off  to-day 
than  they  ever  were  before.  The  prosperity  has  not 
always  been  uniformly  distributed,  either  geographically 
or  among  the  farming  industries,  but  on  the  whole  Ameri- 
can agriculture  has  moved  steadily  forward,  helped  to  a 
better  understanding  of  its  problems  by  the  state  and 
federal  governments,  protected  by  laws  that  give  the 
farmer  a  fairer  chance  in  dealing  with  organized  capital, 
and  stimulated  by  a  variety  of  forces  that  have  been  work- 
ing on  the  whole  group  of  questions,  agricultural,  eco- 
nomic, political,  social,  and  moral,  which  have  come  to  be 
known  as  the  rural  problem.  Under  these  conditions? 
the  effective  organization  of  farming  or  of  agricultural 
industries  has  been  well-nigh  impossible.  To  persist, 
an  agricultural  organization  must  be  the  child  of  necessity 
and  must  crystallize  around  a  vital  economic  question. 
It  must  be  primarily  an  organization  for  industrial  pur- 
poses, not  a  society  of  altruistic  idealists  formed  solely 
on  the  principles  of  universal  brotherhood.  Its  reasons 
for  being  must  be  deep-rooted  in  the  necessity  of  improv- 
ing and  cheapening  cultural  methods,  of  developing  better 
business,  of  improving  the  systems  of  handling,  distributing, 
and  of  selling  the  products  of  the  farm,  and  of  strengthen- 
ing its  relationships  with  society  as  a  whole.  The  desir- 
able ideals  of  mutual  helpfulness  are  more  quickly  reached, 
even  if  indirectly,  during  the  development  of  the  practical 
business  organization.  They  have  a  vital  force  behind 
them  and  an  influence  on  rural  development  such  as  is 
seldom  attained  in  farmers'  organizations  formed  for 
other  purposes. 


8  Cooperation  in  Agriculture 

THE   ECONOMIC   LOSS   IN   RURAL   EFFICIENCY 

Notwithstanding  the  prosperous  condition  of  agricul- 
ture, the  fact  remains  that  a  tremendous  loss  in  rural  effi- 
ciency results  from  the  lack  of  organization  among  farmers. 
The  tiller  of  the  soil  is  still  meeting  single-handed  the 
problems  that  confront  him.  As  an  individual,  he  is 
endeavoring  to  deal  with  large  public  policy  questions. 
He  has  not  an  even  chance  in  handling  that  part  of  his 
business  which  lies  outside  the  production  of  his  crops. 
He  purchases  supplies  in  small  quantities  under  an 
expensive  and  objectionable  credit  system.  Every- 
thing he  buys  —  food,  wire,  nails,  twine,  fertilizer, 
transportation,  the  telephone  —  is  purchased  from  or- 
ganized capital,  often  operating  as  an  unregulated,  preda- 
tory monopoly.  Everything  he  sells  —  cattle,  milk, 
wheat,  poultry,  eggs,  fruit  —  is  sold  to  organizations  of 
capital,  which  also  may  operate  as  a  predatory  combina- 
tion; or  he  may  consign  his  produce  to  middlemen  who, 
as  dealers  in  the  same  products,  are  competitors  of  the 
farmers ;  to  speculators  in  farm  products,  or  to  commission 
merchants  whose  operations  as  semi-public  agents  are 
generally  entirely  unregulated. 

These  remarks  are  not  intended  as  a  general  indict- 
ment of  the  agencies  which  handle  the  products  of  the 
farm.  It  is  a  statement  of  a  part  of  the  rural  problem 
which  has  been  a  vital  social  and  economic  issue  in  more 
or  less  acute  form  ever  since  it  has  been  necessary  to  dis- 
tribute the  surplus  of  the  farm  to  the  consumers  in  town 
and  cities.  It  is  essential  to  the  prosperity  of  American 
agiiculture  and  to  the  welfare  of  the  country  that  the 


Changes  in  Industrial  Methods  9 

distribution  of  farm  products  shall  be  done  by  agencies 
that  specialize  and  equip  themselves  to  perform  this 
particular  service.  Any  other  system  would  lead  to  an 
unequal  distribution  of  products  and  to  economic  chaos. 
The  distributing  agencies  have  usually  not  been  organized 
by  the  producers  themselves.  They  are  composed  of 
individuals,  firms,  or  corporations  who  assume  the  risks 
of  distributing  the  surplus  supphes  of  the  farm  and  who 
bridge  the  stream  between  the  producer  and  the  consumer. 
They  are  the  local  dealers,  the  transportation  agencies 
which  carry  the  products  to  the  towns  and  cities,  the 
brokers,  the  commission  men,  jobbers,  auction  companies, 
warehousemen,  and  the  retailers,  peddlers,  and  store- 
keepers who  sell  the  produce  to  the  consumer.  As  long 
as  these  agencies  distribute  the  farm  crops  uniformly 
throughout  the  season  at  a  reasonable  cost  consideriag 
the  risks  and  the  investment  in  the  distributing  facilities, 
and  as  long  as  they  handle  their  business  so  that  there  is 
an  equitable  sharing  in  the  profits,  they  are  economically 
desirable  from  every  point  of  view.  The  average  farmer 
is  not  often  in  a  position  to  distribute  his  own  crops  di- 
rectly to  the  consumer.  He  has  neither  the  capital  to 
assume  the  risk,  nor  the  knowledge  requisite  to  develop 
a  far-reaching  mercantile  agency,  which  requires  large 
amounts  of  capital  and  a  highly  specialized  organization. 
When  he  steps  outside  of  his  sphere  as  a  producer,  the 
average  farmer  does  not  often  succeed  except  in  the  special 
agricultural  industries  which  have  been  developed  by 
men  of  unusual  experience  and  ability.  But  when  the 
farmer  stands  by  himself  in  dealing  with  all  of  the  agencies 
of  distribution,  he  is  at  a  distinct  disadvantage  in  bargain- 


10  Cooperation  in  Agriculture 

ing  and  in  protecting  himself  against  aggression.  The 
experience  of  the  present  time  shows  that  these  agencies, 
when  left  unchecked,  often  become  predatory  and  exploit 
both  the  producer  and  the  consumer  at  the  expense  of 
the  legitimate  share  in  the  nations'  prosperity  to  which 
each  is  entitled.  Under  these  conditions,  the  economic 
loss  to  agriculture  retards  the  best  development  of  country 
life.  I 

DISSATISFACTION  AMONG  THE   FARMERS 

The  producers  are  not  unmindful  of  the  position  in 
which  the  organization  of  all  kinds  of  industry  has  placed 
them.  The  adjustment  between  the  producer,  the  trans- 
portation agencies,  the  many  kinds  of  middlemen  and  the 
consumers  is  a  subject  of  endless  conflict  and  is  a  leading 
feature  of  the  high  cost  of  living  and  of  other  present- 
day  problems.  Through  all  the  adjustment  of  the  past, 
there  has  appeared  a  rural  discontent  decreasing  or  in- 
creasing simultaneously  with  the  prosperity  of  the  country. 
There  has  been  a  deep-seated  conviction  among  the  farm- 
ers that  in  the  development  of  our  modern  industrial 
methods,  the  agricultural  industries  have  had  their  effi- 
ciency impaired,  that  the  systems  of  distributing  farm 
crops  as  well  as  the  sale  of  farmers'  supplies  are  so  handled 
that  the  individual  farmer  who  acts  alone  pays  the  highest 
price  for  what  he  purchases  and  receives  the  lowest  price 
for  what  he  sells;  while  the  distributing  agencies,  the 
railroads,  the  middlemen,  and  the  retailers  receive  a 
maximum  return  on  their  labor  and  capital,  or  at  least 
have  organized  the  distributing  system  in  such  a  compli- 
cated and  extravagant  way  that  the  producer  is  prevented 


Changes  in  Industrial  Methods  11 

from  sharing  in  the  general  prosperity  to  the  extent  that 
he  feels  his  capital  and  labor  have  contributed. 

EFFORTS  TOWARDS   ORGANIZATION 

This  conviction  on  the  part  of  the  farmer  has  been  a 
source  of  endless  controversy  in  the  past  and  is  now  an 
acute  public  question.  It  has  crystallized  from  time  to 
time  in  different  efforts  to  regulate  by  law  some  of  the 
injustices  from  which  the  producer  thinks  he  suffers. 
Soon  after  the  Civil  War,  it  took  the  form  of  a  widespread 
agitation,  especially  in  the  Mississippi  Valley,  against 
the  granting  of  rebates  and  the  charging  of  extortionate 
discriminating  transportation  rates.  In  one  form  or 
another,  this  agitation  has  continued  to  the  present  time. 
It  has  been  a  leading  factor  in  the  passage  of  the  present 
interstate  commerce  laws  and  in  railroad  legislation  in 
the  states,  in  the  Farmers'  Alliance  Movement,  the 
Populist  Movement,  in  the  Granger  laws  in  the  West 
and  Middle  West,  in  legislation  to  regulate  public  service 
and  private  corporations,  in  the  recent  tariff  discussions, 
in  the  consideration  of  the  high  cost  of  living,  in  num- 
berless state  and  federal  investigations,  and  in  various 
political  campaigns.  The  farmers  have  always  been 
ready  to  invoke  the  law  to  save  themselves  from  the  fate 
of  modern  conditions.  They  have  endeavored  to  protect 
themselves  from  the  abuses  of  the  time  by  seeking  the 
protection  of  governmental  authority,  rather  than  through 
the  organization  of  their  interests  for  better  business 
methods  and  for* the  mutual  safeguarding  and  develop- 
ment of  their  interests.  For  years,  the  rural  classes  have 
felt  that  there  is  too  great  a  difference  between  the  price 


12  Cooperation  in  Agriculture 

which  the  producer  receives  for  his  product  and  that 
which  the  consumer  pays.  It  has  been  shown  by  Secre- 
tary Wilson  ^  that  when  the  consumer  buys  food  for  a  dol- 
lar, the  producer  receives  about  fifty  cents,  the  other  half 
dollar  representing  the  costs  and  profits  of  distribution. 
This  enormous  addition  to  the  cost  of  farm  products, 
equaling  the  total  cost  of  production  plus  the  farmer's 
profit,  is  the  price  which  the  nation  pays  to  the  present 
agencies  of  distribution. 

Since  the  beginning  of  commercial  agriculture,  there 
has  been  an  agitation  against  the  abuses  of  the  distributing 
system.  Sometimes  corrective  legislation  has  resulted, 
again  it  has  been  followed  by  the  formation  of  associa- 
tions of  farmers  through  which  supplies  may  be  purchased 
or  the  crops  distributed  and  marketed.  Such  efforts 
of  the  rural  classes  to  correct  the  injustices  which  they 
have  had  to  face  have  been  continuous  but  not  systemati- 
cally directed  nor  organized.  The  Order  of  the  Patrons 
of  Husbandry,  formed  in  1867,  the  Agricultural  Congress 
in  1870,  the  Farmers'  National  Congress  in  1880,  the 
Farmers'  Alliances  about  1875,  the  Brothers  of  Freedom 
formed  in  the  South  in  1882,  the  Farmers'  Union,  the 
Agricultural  Wheel,  the  Farmers'  Mutual  Benefit  Asso- 
ciation, the  Western  Alliance,  the  Patrons  of  Industry, 
including  both  laborers  and  farmers,  the  New  England 
League,  the  National  Farmers'  League,  the  Citizens' 
Alliance,  and  finally  the  People's  party  formed  between 
1880  and  1892  were  organized  to  bring  about  better  rural 
economic  conditions  by  influencing  legislation  and  to 
regulate  the  industries  with  which  agriculture  comes  in 

1  Report  of  the  Secretary  of  Agriculture,  1911. 


Changes  in  Industrial  Methods  13 

contact.    An  excellent  presentation  of  this  phase  of  rural 
activity  has  been  made  by  Dr.  Coulter.^ 

NEED    OF   BETTER   BUSINESS   AND   BETTER   FARMING 

The  things  most  needed  to  bring  about  a  better  agri- 
cultural condition,  as  pointed  out  by  President  Roosevelt 
in  connection  with  the  Country  Life  Commission,  are 
better  business  methods,  better  farming,  and  better  living. 
The  solutions  of  these  questions  depend  on  the  farmer 
himself,  aided  by  state  and  federal  legislation.  Their 
attainment  means  a  further  readjustment  of  the  activities 
of  the  farmer  to  present  social  and  industrial  conditions. 
It  means  that  rural  methods  of  thought,  rural  education, 
and  the  business  of  the  farmer  must  be  slowly  reorganized 
so  that  agriculture  will  not  suffer  unduly  in  its  contact 
with  the  organized  industries.  It  means  that  the  pur- 
chase of  the  things  used  on  the  farm,  the  distribution  and 
the  sale  of  farm  crops,  and  the  handling  of  rural  public 
policy  questions  must  be  organized  on  principles  similar 
to  those  that  have  contributed  to  the  present  high  state 
of  efficiency  of  capital  and  labor.  It  means  that  the  farmer 
must  give  more  attention  to  his  relations  to  the  community, 
that  farmers  must  work  together,  that  their  common 
interests  must  be  united  in  a  force  strong  enough  to  bring 
a  healthy  constructive  influence  into  the  upbuilding  of  a 
better  country  life  and  sufficiently  powerful  to  stand  on 
the  same  level  with  every  interest  with  which  it  comes  in 
contact. 

It  will  never  be  possible,  nor  would  it  be  desirable,  to 

1 "  Organization  among  the  Farmers  of  the  United  States,"  J.  L.  Coul- 
ter, Yale  Review,  1909. 


14  Cooperation  in  Agriculture 

industrialize  agriculture  to  the  extent  that  the  secondary 
industries  have  been  industrialized.  The  fundamental 
aim  of  the  farm,  as  ably  emphasized  by  Dr.  Carver  in 
his  "Principles  of  Rural  Social  Life,"  is  to  establish  an 
estate  where  a  vigorous  family  can  be  developed  and  per- 
petuated. The  farm  is  not  primarily  a  money-making 
unit.  It  must  furnish  an  income  sufficient  to  enable  the 
family  to  enjoy  a  social  life  and  to  have  enough  for  intel- 
lectual and  aesthetic  pleasure,  but  the  operations  of  the 
farm  and  the  business  connected  with  it  must  be  cen- 
tered around  and  be  made  a  part  of  the  family  develop- 
ment. Any  movement  that  through  over-commercializa- 
tion of  the  farm  weakens  the  building  of  the  home  as  the 
fundamental  aim  is  imsound  and  in  the  end  will  prove  a 
loss  to  the  strength  and  to  the  best  traditions  of  country 
life. 

How  far  then  can  the  farmer  go  in  organizing  agriculture 
along  modem  industrial  lines?  To  what  extent  does 
agriculture  lend  itself  to  business  organization?  What 
are  the  principles  of  organization  best  suited  to  agricul- 
tural industries?  Which  are  the  agricultural  industries 
that  are  capable  of  organization?  What  are  the  facts 
that  have  caused  some  of  the  agricultural  organizations 
to  succeed,  and  what  are  the  rocks  on  which  most  of  them 
in  the  past  have  been  wrecked?  How  can  the  methods 
of  marketing,  the  problems  of  cooperation,  and  rural  public 
policy  questions  be  handled  in  relation  to  the  farmers 
as  a  class?  These  are  some  of  the  questions  that  the 
farmers  all  over  the  country  are  asking  at  the  present  time. 
They  are  problems  which  students  of  rural  economics 
are  considering,  which  public  men  are  discussing  widely, 


Changes  in  Industrial  Methods  15 

and  which  agitators  of  the  agricultural  class  are  endeavor- 
ing to  answer  in  their  efforts  to  organize  the  farmers  for 
class  purposes. 

ORGANIZATION   METHODS   STILL   EXPERIMENTAL 

To  any  one  who  has  had  experience  in  agricultural  or- 
ganizations of  the  business  type,  it  is  clear  that  the  whole 
question  of  rural  economic  organization  is  still  in  the 
experimental  stage.  There  have  been  thousands  of  busi- 
ness organizations  formed  by  farmers  in  the  past  to  pur- 
chase supplies,  to  handle  farm  crops,  to  convert  them 
into  manufactured  products,  to  distribute  and  sell  them, 
and  to  bring  about  a  better  rural  condition  generally. 
Many  of  these  associations  are  being  formed  at  the  present 
time,  and  there  is  every  indication  that  American  agricul- 
ture is  just  now  entering  an  unusually  active  period  of 
industrial  and  social  organization.  Few  of  these  organi- 
zations have  been  successful,  and  it  is  probably  not  over- 
stating the  case  to  say  that  still  fewer  have  been  founded 
on  principles  which  if  generally  adopted  would  help  in 
the  solution  of  the  rural  economic  and  social  problem. 
It  is  generally  true  that  the  so-called  farmers'  business 
organizations  have  not  been  formed  primarily  to  improve 
the  industrial  relations  of  the  farmer.  They  have  usually 
combined  political  questions,  social  and  legislative  prob- 
lems, and  business  enterprise.  Many  of  them  have  been 
formed  by  impractical  enthusiasts  with  high  motives  but 
with  little  business  experience,  desiring  to  reform  every 
one  except  themselves,  to  wage  war  on  their  neighbors 
who  do  not  affiliate,  to  fight  every  competitor,  and  to 
found  the  organization  on  enthusiasm,  altruism,  and  gen- 


16  Cooperation  in  Agriculture 

eral  discontent.  It  is  a  common  fault  that  they  have 
aimed  too  high  to  be  useful.  Many  of  them  have  been 
formed  ahead  of  their  time  through  the  efforts  of  oppor- 
tunists when  there  was  no  real  call  for  organization  or 
when  the  farmers  were  too  prosperous  to  hold  together. 
Many  have  been  managed  by  incompetent  local  men  who 
have  been  imsuccessful  in  business  or  who  have  been 
selected  by  the  farmers  because  of  evidence  of  local  leader- 
ship rather  than  for  business  qualities,  and,  finally,  the 
great  majority  of  the  organizations  have  been  managed 
by  totally  incompetent,  low-salaried  men  because  the 
farmers  have  not  realized  that  a  business  organization 
to  succeed  depends  primarily  on  a  manager  possessing  a 
high  order  of  business  and  organizing  ability.  Such  or- 
ganizations have  had  a  short,  violent  existence  and  h^ve 
died  as  every  business  undertaking  must  when  bom  pre- 
maturely or  when  placed  in  the  hands  of  inexperienced, 
incompetent  leaders. 

It  would  be  unfair  to  overlook  the  splendid  efforts  of 
many  of  those  who,  in  the  past,  have  tried  to  organize 
the  farmers  under  a  better  business  system.  Many  of 
these  enthusiastic  men  have  set  forth  principles  that 
underlie  the  most  successful  organizations  of  the  present 
time.  They  may  have  been  in  advance  of  the  necessity 
for  organizing.  They  may  have  been  ahead  of  the  eco- 
nomic and  social  ideals  of  the  people  whose  condition  they 
tried  to  improve.  Their  ideas  may  have  been  crude  and 
impractical,  but  they  scattered  seeds  among  the  rural 
classes  which  have  been  growing  and  developing  more 
perfectly  and  which  are  now  reaching  the  harvest  time. 
Every  movement  that  seeks  to  reorganize  and  to  establish 


Changes  in  Industrial  Methods  17 

new  industrial  systems  must  grow  through  gradual  evolu- 
tion. Every  new  movement  must  have  its  enthusiasts 
who  hitch  their  wagons  to  the  stars  but  who  leave  the 
working  out  of  details  to  a  future  generation. 

In  the  following  chapters,  an  effort  is  made  to  point 
out  the  principles  on  which  successful  industrial  organiza- 
tion among  farmers  is  likely  to  rest,  the  legal  difficulties 
of  organization,  the  principles  of  federation,  the  obstacles 
in  the  way  of  organization,  and  the  agricultural  industries 
in  which  business  organization  is  most  likely  to  succeed. 


CHAPTER  II 
FUNDAMENTALS  IN  COOPERATION 

Under  present  economic  conditions  in  America,  it  is  a 
fundamental  principle  that  a  successful  industrial  organi- 
zation among  farmers  must  be  founded  on  a  special  in- 
dustry, such  as  cotton,  tobacco,  milk,  butter,  poultry, 
small  fruits,  truck  crops,  peaches,  apples,  or  citrus  fruits. 
Farmers  who  produce  general  farm  crops  for  which  there 
is  a  steady  demand  and  a  ready  market  do  not  always 
have  a  common  motive  for  holding  together,  especially 
if  they  are  fairly  prosperous.  If  they  can  sell  their  prod- 
uce without  difficulty,  or  do  not  have  to  develop  special 
markets  or  marketing  systems,  they  may  be  satisfied  with 
conditions  as  they  are.  Up  to  the  present  time,  it  has 
not  been  possible  for  American  farmers  who  grow  a  num- 
ber of  general  farm  crops  to  organize  for  business  purposes 
except  in  rare  instances  to  supply  local  markets.  The 
marketing  of  each  product  follows  well-established  lines 
and  these  are  firmly  intrenched  in  the  hands  of  established 
marketing  agencies,  with  which  few  organization  managers 
have  sufficient  experience  or  skill  to  compete. 

On  the  other  hand,  the  special  industries  like  those 
mentioned  in  the  preceding  paragraph  have  to  meet 
special  problems  of  production,  of  crop  handling,  and  of 
marketing.  In  a  special  industry,  the  risk  is  greater,  the 
stake  is  larger,  the  attraction  is  for  men  with  more  than 

18 


Fundamentals  in  Cooperation  19 

the  average  resourcefulness  and  initiative.  These  men 
have  a  common  purpose,  and  they  are  naturally  better 
fitted  to  meet  it.  In  a  dairy  section,  the  farmers  are 
interested  in  the  testing  of  cows,  in  the  manufacture  of 
cheese,  in  the  sale  of  milk,  in  the  purchase  of  feed,  or  in 
the  establishment  and  maintenance  of  a  creamery.  In  an 
apple  section,  the  growers  are  interested  in  the  standardi- 
zation of  grades,  in  uniform  packing,  in  a  central  packing- 
house or  storage  plant,  in  the  purchase  of  supplies  for 
spraying,  for  the  packing  of  the  fruit  or  for  other  purposes. 
In  the  citrus  industry,  growers  in  California  have  or- 
ganized to  purchase  or  manufacture  the  supplies  used  in 
the  groves  and  packing-houses,  to  build  central  plants 
where  the  fruit  of  the  growers  is  assembled  for  packing, 
to  develop  markets  and  to  equalize  and  effect  economies 
in  distribution,  to  reduce  the  number  of  middlemen,  to 
handle  questions  of  public  policy  relating  to  the  industry 
and  systematically  to  upbuild  the  industry  in  other  ways. 
Potato  growers,  cotton  planters,  cranberry  growers,  or 
other  special  producers  have  common  problems  confront- 
ing them,  which  they  are  naturally  fitted  to  grasp  collec- 
tively but  which  the  individual  producer  would  be  unable 
to  meet  successfully  alone. 

THE   UNIT   MUST  LIE   IN   A  RESTRICTED  AREA 

It  is  fundamental  that  the  unit  of  each  agricultural 
industrial  organization  formed  to  distribute  and  sell  farm 
crops  or  for  other  business  purposes  must  lie  in  a  compara- 
tively small  area.  The  members  must  be  well  acquainted 
with  each  other,  their  aims  must  be  similar,  and  they 
must  grow  products  of  similar  quality  and  character  if 


20  Cooperation  in  Agriculture 

they  are  to  succeed  when  associated  with  one  another. 
It  is  equally  important  that  the  membership  be  a  stable 
one  and  that  the  farm  lands  are  not  frequently  changing 
hands,  a  condition  which  often  operates  against  the  suc- 
cess of  the  cooperative  movement  in  the  newer  sections 
of  the  country.  If  the  products  vary  widely  on  account 
of  differences  in  the  soil,  in  climate,  or  other  environmental 
conditions,  the  grades  are  not  uniform  and  the  producers 
cannot  easily  be  held  in  a  common  organization.  The 
efforts  that  are  frequently  made  to  have  a  single  organiza- 
tion cover  a  wide  territory  are,  therefore,  not  likely  to 
succeed.  It  is  desirable  from  every  point  of  view  that 
each  rural  community  and  each  individual  should  retain 
its  individuality  to  the  greatest  possible  extent,  that  it 
should  not  have  local  pride  and  ambition  stifled  by  too 
general  a  mixture  with  other  sections,  and  that  it  should 
be  encouraged  to  build  up  a  local  reputation  for  its  prod- 
ucts that  distinguishes  it  from  other  communities.  The 
vitality  of  the  country,  as  Professor  Bailey  has  forcefully 
pointed  out,  depends  on  local  and  individual  initiative, 
and  any  effort  towards  organization  that  fails  to  recognize 
this  principle  is  fundamentally  unsound.  There  have 
been  many  attempts  to  amalgamate  the  growers  of  a  single 
crop  in  different  sections  into  one  large  organization  just 
as  the  Knights  of  Labor  formerly  attempted  to  amalga- 
mate different  laboring  men  into  one  central  organization. 
None  of  these  efforts  have  succeeded.  The  apple-growers 
of  one  section  may  be  encouraged  to  organize  to  prepare 
the  fruit  for  market  and  for  other  purposes  that  are  local 
in  character ;  the  growers  of  another  valley  a  few  miles 
distant  where  the  varieties  are  similar  but  the  style  and 


Fundamentals  in  Cooperation  21 

finish  of  the  fruit  different  should  be  led  to  form  a  local 
organization  for  the  same  purpose.  For  the  same  reason, 
the  growers  of  every  other  local  section  or  in  different 
parts  of  the  same  section  where  the  fruit  is  different  in 
character  should  organize  and  develop  their  own  local 
business  problems.  Later,  as  a  matter  of  economy  and 
business  efficiency,  these  different  associations  may  feder- 
ate and  organize  a  central  body  to  act  as  an  agent  in  mar- 
keting the  fruit  of  each  association  or  to  furnish  the  facili- 
ties for  marketing,  to  purchase  the  supplies  used  by  all, 
and  to  handle  these  problems  that  are  common  to  all  alike. 
But  each  association  should  preserve  its  local  character 
by  selling  its  product  under  a  brand  that  is  the  exclusive 
property  of  that  association,  thereby  holding  and  develop- 
ing the  local  pride  and  reputation  of  that  section. 

AGRICULTURAL    ORGANIZATION    MUST     BE     BORN     OF     NE- 
CESSITY 

The  reason  for  an  industrial  organization  among  farmers 
must  lie  in  some  vital  service  which  it  is  expected  to  per- 
form, if  it  is  to  have  virility  enough  to  live  in  the  face  of 
the  competition  to  which  every  new  farmers'  organiza- 
tion is  subjected,  A  farmers'  business  association  cannot 
be  formed  without  competing  with  agencies  already  es- 
tablished. If  it  is  a  serious  business  undertaking,  the 
forces  of  competition  will  be  directed  towards  crushing 
it ;  it  will  be  viciously  attacked  by  its  competitors ;  in- 
sidious suspicions  of  all  kinds  which  are  apt  to  influence 
the  average  farmer  will  be  circulated  regarding  it ;  it 
may  be  crippled  by  the  railroads  through  quiet  discrimina- 
tion in  the  furnishing  of  cars  or  in  the  extending  of  trans- 


22  Cooperation  in  Agriculture 

portation  facilities  to  its  competitors,  or  by  some  other 
influence  over  which  its  competitors  have  control ;  and 
it  is  likely  to  fail  at  the  start  in  the  face  of  the  fire  which 
it  will  have  to  meet  unless  it  is  founded  on  the  bed  rock 
of  necessity.  Among  farmers,  who  under  existing  condi- 
tions are  already  prosperous,  the  need  of  business  organi- 
zation is  not  usually  felt,  even  though  the  costs  of  market- 
ing and  the  extravagant  profits  of  the  middlemen  or  the 
railroads  might  be  greatly  reduced.  They  must  feel  the 
pressure  of  need  before  they  can  launch  a  successful  busi- 
ness association.  When  the  farmers  buy  their  supplies 
at  reasonable  prices,  and  sell  their  products  readily  at 
a  good  profit,  they  do  not  feel  the  necessity  of  organiza- 
tion. It  has  been  the  experience  of  the  past  that  they 
must  feel  the  need  of  getting  together  to  meet  a  crisis  in 
their  affairs,  and  the  realization  of  the  need  must  spring 
from  within  and  not  be  forced  on  them  from  without  by 
the  enthusiasm  of  some  opportunist  who  seeks  to  unite 
the  farmers  on  the  principle  that  organization  is  a  good 
thing.  American  agriculture  is  strewn  with  the  wrecks 
of  associations  that  were  the  outcome  of  high  motives 
and  impractical  enthusiasm.  It  will  continue  to  be  filled 
with  derelict  associations  as  long  as  they  are  formed  by 
professional  organizers,  by  middlemen  who  seek  to  control 
the  products  of  a  community,  or  by  impractical  farmers 
who  affiliate  to  fight  some  evil  but  who  fail  to  form  on  a 
broad,  constructive  basis  for  the  upbuilding  of  the  busi- 
ness side  of  their  industry.  To  unite  successfully,  a 
group  of  farmers  in  the  past  have  had  to  feel  the  effect  of 
hard  times,  or  of  oppression  by  the  railroads,  a  helpless- 
ness on  account  of  a  combination  among  those  who  buy 


Fundamentals  in  Cooperation  23 

their  products,  or  of  those  from  whom  they  purchase 
suppHes.  They  must  have  had  big  obstacles  to  overcome, 
such  as  long  distances  to  transport  their  products,  inad- 
equate transportation  facilities,  unreasonable  freight 
rates,  a  perishable  product  to  market,  or  expensive  oper- 
ating costs.  In  short,  if  an  organization  is  to  be  success- 
ful, the  investment  of  the  farmer  must  be  threatened  by 
existing  social  and  economic  conditions  before  he  can 
overcome  his  individualism  sufficiently  and  can  develop 
a  fraternal  spirit  strong  enough  to  pull  with  his  neighbors 
in  cooperative  team  work.  This  is  especially  true  in  the 
older  parts  of  the  country  where  diversified  farming  is 
more  largely  practiced.  If  he  is  already  successful,  he 
has  been  slow  to  embark  on  the  complicated  sea  of  co- 
operative business.  The  point  of  view  of  the  farmer  is 
being  gradually  readjusted  by  scientific  education  and 
experience,  and  in  time  he  will  unite  with  his  neighbors 
to  bring  about  better  farming,  better  business  methods, 
and  a  richer  country  life.  Then  it  will  be  possible  to 
inaugurate  a  new  order  of  industrial  agriculture,  and  a 
new  race  of  farmers  will  grow  up  like  those  who  are  settling 
in  the  foothills  and  valleys  of  the  newer  western  states. 
Intelligent  cooperation  among  farmers  may  accomplish 
all  of  these  things  and  make  for  progress  in  a  community 
such  as  no  unorganized  agricultural  industry  can  foster. 
But  successful  cooperation  develops  through  a  gradual 
evolution,  the  mainspring  of  which,  at  least  in  its  child- 
hood, must  be  grim  necessity.  If  it  is  bom  prematurely, 
it  starts  with  a  weak  constitution  and  expires  in  the  first 
encounter  with  adversity.  It  must  be  formed  by  farmers 
who  realize  that  agriculture  is  passing  through  a  slow 


24  Cooperation  in  Agriculture 

evolution  in  its  adjustment  to  modern  social  and  eco- 
nomic changes,  and  that  the  business  of  the  farmer  must  be 
handled  collectively  rather  than  individually  if  the  farmer 
is  to  share  equitably  in  the  increasing  prosperity  which 
the  better  organization  of  all  kinds  of  industry  has  brought 
to  the  country. 

THE  ORGANIZATION  SHOULD  BE  COOPERATIVE  IN  FORM 

There  are  two  systems  under  which  a  farmers'  business 
cooperative  association  may  be  formed.  It  may  be  in- 
corporated as  a  non-profit  corporation  where  the  laws  of 
a  state  provide  for  corporations  of  this  character;  or  it 
may  be  formed  as  a  corporation  for  pecuniary  profit  with 
a  limitation  placed  upon  the  rights  of  the  stockholders 
and  the  methods  of  distributing  the  surplus  earnings,  the 
method  of  regulating  the  rights  of  the  stockholders  and 
the  surplus  earnings  being  defined  by  the  statute,  or  the 
right  to  regulate  them  being  conferred  by  the  statute  on 
the  corporation  through  the  by-laws  of  the  association. 
If  the  association  is  formed  as  a  corporation  for  pecuniary 
profit  where  state  laws  permit,  the  capital  stock  should 
receive  but  a  limited  rate  of  interest,  usually  not  more 
than  the  customary  interest  rate,  each  stockholder  should 
generally  have  only  one  vote  with  no  proxies,  or  the  votes 
may  be  proportional  to  the  amount  of  product  contributed 
by  each  member;  no  one  stockholder  should  hold  more 
than  a  small  percentage  of  the  stock  without  the  consent 
of  the  corporation;  and  the  net  proceeds  of  the  sales  of 
products  should  be  distributed  pro  rata  on  the  products 
contributed  or  on  the  purchases  of  each  member. 

If  formed  as  a  corporation  without  pecuniary  profit, 


Fundamentals  in  Cooperation  25 

stock  certificates  are  not  issued  and  membership  is  evi- 
denced by  a  certificate  of  membership.  In  this  case,  each 
member  usually  has  one  vote  or  the  voting  power  may  be 
proportional  to  the  product  contributed,  the  customary  in- 
terest may  be  paid  on  the  capital  invested  in  the  corpora- 
tion, and,  after  operating  expenses,  a  reserve  fund  suffi- 
ciently large  to  meet  debts  and  losses  and  a  fund  covering 
depreciation  are  set  aside,  the  surplus  is  then  distributed 
to  the  members  in  proportion  to  the  amount  of  business 
transacted  through  the  organization,  either  in  the  pur- 
chase of  supplies,  in  proportion  to  the  amount  of  produce 
contributed  by  each,  or  in  proportion  to  other  service  ren- 
dered. In  the  non-profit  corporation  or  in  the  corpora- 
tion for  profit,  the  stock  or  the  membership  should  not  be 
transferable  except  under  rules  legally  defined  by  the 
corporation. 

THE   MEMBERSHIP   IN  A   FARMERS'    ORGANIZATION 

A  producers'  organization  should  be  composed  exclu- 
sively of  farmers  who  are  acquainted  and  who  have  con- 
fidence in  each  other.  If  the  organization  includes  those 
with  whom  he  has  business  relations  but  who  are  not  them- 
selves producers,  it  is  in  danger  of  losing  its  distinctive 
cooperative  features,  and  the  duration  of  its  existence  is 
problematical.  Many  farmers'  associations  are  formed 
through  the  efforts  of  local  bankers  or  merchants,  or  by 
outside  jobbers  or  commission  merchants.  Associations 
formed  in  this  manner  may  be  well  organized  and  may  be 
successfully  operated  for  a  time  if  the  policies  and  manage- 
ment lie  in  the  hands  of  the  producers.  In  some  of  the 
fruit-growing  sections,  a  broker  desiring  a  position  as  man- 


26  Cooperation  in  Agriculture 

ager  has  organized  the  growers.  An  established  commis- 
sion firm  has  accomplished  the  same  end  because  it  could 
more  readily  handle  a  large  business  through  one  channel 
than  with  each  individual  farmer.  On  the  other  hand, 
they  are  often  formed  by  local  business  men  who  have  no 
desire  to  share  in  the  immediate  profits  and  whose  sole 
desire  is  to  promote  the  cooperative  method  in  order  to 
bring  about  a  better  industrial  condition  among  the  rural 
classes.  Organizations  that  are  formed  in  this  way  may 
help  a  local  situation  temporarily,  but  it  is  unwise  for  a 
group  of  farmers  to  place  themselves  in  a  position  in  which 
a  marketing,  financial,  or  any  other  agency  can  determine 
its  policy  or  influence  or  control  its  management.  It  has 
been  the  experience  of  the  successful  farmers'  business 
organizations  that  its  policy  and  management,  the  voting 
power,  and  the  direction  of  its  business  operations  must 
rest  exclusively  in  the  hands  of  the  producers,  otherwise 
the  organization  is  likely  to  pass  into  the  control  of  those 
whose  interest  lies  in  the  dividends  on  the  capital  stock, 
rather  than  in  a  desire  to  improve  the  farmer's  condition 
by  the  distribution  and  sale  of  crops  or  the  purchase  of 
supplies  along  cooperative  lines. 

It  is  therefore  fundamental  that  the  control  of  the  mem- 
bership in  a  farmers'  organization  should  be  fixed  by  rules 
legally  laid  down  by  the  directors  of  the  organization 
rather  than  rest  upon  the  mood  of  the  individual  members 
or  on  rules  that  have  no  legal  basis.  Membership  in  a 
non-stock  organization  should  be  evidenced  by  a  certifi- 
cate of  membership ;  in  a  stock  corporation,  by  a  stock 
certificate.  Membership  in  a  non-stock  corporation  should 
not  be  assignable  to  any  other  person,  nor  should  the 


Fundamentals  in  Cooperation  27 

purchaser  or  any  one  else  who  succeeds  to  the  property 
rights  of  a  member  be  entitled  to  membership  except 
under  rules  legally  fixed  by  the  directors  of  the  associa- 
tion. It  has  often  happened  that  the  transfer  of  stock 
from  a  producer  to  another  person,  an  act  which  cannot 
be  prevented  when  the  association  is  formed  as  an  ordinary 
stock  corporation  for  pecuniary  profit,  has  resulted  in  the 
transfer  of  the  control  of  the  organization  to  those  who 
may  be  opposed  to  the  continuance  of  the  organization, 
or  the  organization  may  be  controlled  by  former  stock- 
holders who  have  sold  their  land  and  are  no  longer  en- 
gaged in  agriculture.  These  difficulties  and  methods  of 
avoiding  them  will  be  more  fully  set  forth  in  a  subsequent 
chapter. 

THE   VOTING   POWER  OF  MEMBERS 

As  a  general  principle,  the  most  desirable  form  of  or- 
ganization is  the  industrial  democracy  in  which  each 
member  has  an  equal  voice  in  the  management  and  shares 
proportionally  in  the  benefits  and  risks  with  every  other 
member.  This  type  of  organization,  like  the  different 
divisions  of  American  government,  is  founded  on  equality 
in  the  rights  and  responsibilities  of  membership.  The 
basis  of  the  organization  is  the  individual  member,  a  num- 
ber of  whom  have  joined  together  to  accomplish  a  mutu- 
ally common  purpose.  This  is  very  different  from  the 
principle  of  the  stock  corporation  formed  for  pecuniary 
profit.  In  the  latter,  the  responsibility  and  voting  power 
and  profits  of  the  member  are  proportional  to  the  amount 
of  capital  invested  by  each.  In  the  stock  corporation, 
capital  is  the  basis  of  the  organization  and  of  its  control. 


28  Cooperation  in  Agriculture 

In  the  cooperative  association,  the  controlling  factor  is 
men;  in  the  other,  money.  The  "one  man,  one  vote" 
principle  of  organization  is  best  suited  when  the  interest 
of  each  member  in  the  association  is  approximately  equal 
to  that  of  every  other  one.  Under  these  conditions,  each 
member  contributes  equally  to  the  investment  necessary 
for  operation,  each  has  an  equal  voice  in  the  management 
of  the  business,  and  all  share  pro  rata  in  the  advantages 
and  the  risks.  The  object  of  the  organization  is  to  serve 
the  members  and  to  distribute  the  earnings  on  the  basis 
of  the  member's  business. 

The  "one  man,  one  vote"  principle,  however,  is  not 
always  adapted  to  industries  in  which  the  amount  of  the 
product  contributed  by  the  members  varies  widely.  In 
this  case,  the  voting  power,  property  rights,  and  interests 
of  its  members  may  be  unequal  and  the  members  may 
contribute  to  the  investment  in  the  proportion  that  the 
product  of  each  member  bears  to  the  total  product  handled 
by  the  association,  or  in  proportion  to  the  acreage  of  each 
member.  Under  these  conditions,  the  voting  power, 
property  rights,  and  interest  of  each  member  may  be  in 
proportion  to  such  contribution,  or  in  the  proportion  that 
the  acreage  of  each  member  bears  to  the  total  acreage 
which  contributes  to  the  association,  or  proportionally 
in  other  ways.  Among  many  earnest  advocates  of  the 
cooperative  method,  the  "one  man,  one  vote"  idea  is 
held  as  a  sacred  fundamental  principle  to  which  there 
should  be  no  exception.  It  is  an  application  of  ideal  demo- 
cratic principles  to  business  transactions.  This  is  the  usual 
method  in  the  foreign  cooperative  societies,  and  as  a  general 
principle,  it  should  usually  be  adopted  in  America.     This 


Fundamentals  in  Cooperation  29 

limitation  has  been  incorporated  in  the  laws  of  some  of 
the  states  which  provide  for  the  formation  of  cooperative 
associations,  notably  in  Nebraska,  Minnesota,  and  Wis- 
consin. But  experience  in  some  of  the  most  successful 
American  non-profit  cooperative  business  associations, 
like  the  organizations  of  citrus  fruit-growers  in  California 
in  which  the  property  interests  of  the  growers  are  widely 
variable,  has  shown  that  the  grower  who  markets  $100,000 
worth  of  fruit  through  a  cooperative  association  will  not 
consent,  nor  should  he  be  expected  to  stand  on  the  same 
basis  of  responsibility  in  the  management  of  the  organiza- 
tion or  in  liability  as  a  fellow  grower  who  contributes 
not  more  than  $5000  worth  of  fruit.  Experience  has 
shown  also  that  the  voting  power  of  the  members  may  be 
equal  with  a  reservation  that  it  may  at  any  time  be  pro- 
portional to  the  product  or  acreage  contributed,  with  a 
limit  placed  on  the  voting  power  of  large  producers,  with- 
out weakening  the  fundamental  principles  that  distinguish 
a  cooperative  non-profit  corporation  from  an  ordinary 
stock  corporation  formed  for  pecimiary  profit. 

THE    MEMBERSHIP   AGREEMENT 

It  is  fundamental  that  the  members  of  a  farmers'  co- 
operative organization  be  held  together  by  a  contract  or 
agreement,  or  by  a  binding  provision  in  the  by-laws  to 
be  signed  by  every  member.  Voluntary  membership  is 
suicidal  to  a  cooperative  business  organization.  The  suc- 
cess of  the  cooperative  movement  depends,  in  the  final 
analysis,  on  the  steadfastness  and  cooperation  of  the  mem- 
bers. Their  support  must  be  in  the  nature  of  a  strong 
conviction  that  the  cooperative  principle  as  a  business 


30  Cooperation  in  Agriculture 

system  is  right,  and  their  faith  and  loyalty  must  be  large 
enough  to  hold  them  together  in  the  face  of  temporary 
adversity  or  of  the  insidious  efforts  of  the  opponents  of 
the  cooperative  method  to  disrupt  the  system.  Without 
this  loyal  support,  a  board  of  directors  or  a  manager  cannot 
succeed  in  the  development  of  an  efficient  business  or- 
ganization. It  is  a  fact  that  in  many  sections,  many  of 
the  farmers  have  not  shown  loyalty  to  cooperative  asso- 
ciations formed  to  distribute  and  sell  their  products. 
They  have  no  interest  in  the  general  rural  movement. 
They  are  willing  to  have  their  neighbors  form  organiza- 
tions and  assume  all  of  the  responsibilities  connected  with 
their  development  and  maintenance.  They  prefer  to 
sell  their  products  to  buyers  whenever  they  can  and  to 
have  a  cooperative  association  in  the  neighborhood  as  a 
house  of  refuge  through  which  their  crops  can  be  sold 
whenever  they  are  unable  to  dispose  of  them  to  better 
advantage  in  any  other  way.  They  know  that  a  coopera- 
tive association  may  prevent  the  buyers  from  forcing  the 
producer  to  sell  his  crop  at  an  unreasonably  low  price, 
but  they  are  interested  in  it  only  as  a  means  of  getting 
more  money  for  their  crops  from  year  to  year.  There 
are  many  other  well-meaning  farmers  who  believe  in  the 
cooperative  movement  as  a  means  of  giving  stability  to 
the  crop-marketing  system.  They  do  not  antagonize  it; 
in  fact,  they  encourage  it  in  every  way  and  would  give  it 
direct  support  if  its  stability  were  in  danger.  But  they 
will  not  identify  themselves  with  it  because  they  prefer 
to  act  independently  while  accepting  all  the  advantages 
it  confers  on  the  industry  with  which  they  are  connected. 
As  a  business  precaution,  a  contract  or  agreement  be- 


Fundamentals  in  Cooperation  31 

tween  the  association  and  its  members  is  essential  to  the 
development  of  a  stable  cooperative  enterprise.  Unless 
otherwise  provided,  the  agreement  should  give  the  asso- 
ciation the  exclusive  right  to  handle  the  products  of  its 
members,  or  exclusively  to  supervise  or  execute  or  regulate 
such  functions  for  the  members  as  it  is  organized  to  per- 
form. The  idea  of  the  cooperative  organization  should 
be  broadly  democratic.  Each  member  should  be  allowed 
to  exercise  the  fullest  discretion  regarding  the  production 
of  his  crops,  and  the  handling  of  such  questions  as  do  not 
conflict  with  the  fundamental  principles  of  the  organiza- 
tion. On  the  other  hand,  the  association  must  know 
definitely  what  it  is  expected  to  do,  including  the  volume 
of  business  it  is  expected  to  transact,  and  with  that  in 
view,  it  should  have  an  agreement  with  its  members 
setting  forth  in  detail  the  relations  and  responsibilities 
existing  between  each  member  and  the  organization. 
The  agreement  or  the  provision  in  the  by-laws  should 
provide  that  an  assessment  be  levied  against  every  mem- 
ber in  lieu  of  liquidated  damages  whenever  its  provisions 
are  broken.  The  membership  agreement  is  the  founda- 
tion stone  on  which  the  stability  of  a  farmers'  cooperative 
business  association  is  reared.  Without  it  no  association 
can  hold  its  membership  together  when  competing  in- 
terests become  active,  nor  can  it  attain  the  degree  of 
stability  that  is  essential  to  a  business  undertaking.  Ex- 
perience has  shown  that  those  associations  are  likely  to 
fail  that  depend  on  the  honor  of  the  members  alone  to 
hold  them  together  with  no  binding  legal  obligation  in 
addition.  In  some  of  the  California  citrus  fruit  organiza- 
tions, the  membership  agreement  provides  that  twenty- 


32  Cooperation  in  Agriculture 

five  cents  per  package  shall  be  assessed  against  every 
package  of  fruit  sold  outside  of  the  association  as  liqui- 
dated damages  sustained  by  the  association  which  has  in- 
curred expenses  to  provide  for  the  selling  and  marketing 
of  the  fruit.  In  some  of  the  farmers'  cooperative  grain 
elevators,  the  agreements  provide  that  the  producer  may 
market  his  crop  outside  of  the  association  by  paying  to 
the  association  a  commission  of  two  per  cent  or  more  of 
the  price  received  outside.  The  legality  of  such  special 
requirements  has  been  called  into  question  in  some  of  the 
courts  when  these  requirements  operate  as  a  penalty 
rather  than  as  a  liquidation  of  damages.  In  a  recent 
decision  in  Iowa  affecting  the  right  of  a  farmers'  coopera- 
tive society  to  oblige  all  members  selling  hogs  or  produce 
to  any  other  individual  or  company  to  pay  into  the  treas- 
ury of  the  company  five  cents  a  hundredweight,  the  court 
permanently  enjouied  the  association  from  enforcing  such 
a  rule.  It  held  that  the  association  must  enter  into  the 
open  market  in  seeking  business  the  same  as  other  con- 
cerns and  that  the  enforcement  of  the  rule  as  provided  in 
its  by-laws  compelled  any  other  firm  doing  business  in  the 
same  territory  to  pay  to  it  ten  cents  more  per  hundred- 
weight than  the  farmers'  association.  It  thereby  acted 
as  a  restraint  of  trade. 

A  Citrus  Fruit  Membership  Agreement,  as  an  Illustroiion 

The  following  is  a  copy  of  a  uniform  crop  agreement 
between  the  members  and  many  of  the  associations  that 
are  afl&liated  with  the  California  Fruit  Growers'  Exchange. 
This  organization  represents  six  to  eight  thousand  growers, 
who  have  formed  more  than  one  hundred  local  associa' 


Fundamentals  in  Cooperation  33 

tions  through  which  the  fruit  is  prepared  for  shipment 
to  be  marketed  through  the  agents  provided  by  the  cen- 
tral organization.  This  agreement  shows  some  of  the 
essential  features  that  should  be  included  in  the  contract 
between  the  members  and  the  association  in  an  organiza- 
tion formed  for  the  distribution  and  sale  of  farm  products. 
The  contract  may  be  a  separate  document  or  it  may  be 
incorporated  in  the  by-laws  of  the  organization. 

UNIFORM   CROP  AGREEMENT 

This  Agreement,  Made  the day  of 

A.D.  191-,  between  the Association,  a  cor- 
poration incorporated  under  the  laws  of  the  State  of  California, 

and  having  its  principal  place  of  business  at 

in  said  State,  and  affiliated  with  the ,  a 

corporation  incorporated  under  said  laws  for  the  pxirpose  of 
marketing  California  citrus  fruits,  the  party  of  the  first  part,  and 

the  undersigned  citrus  fruit-growers  of , 

said  State,  the  parties  of  the  second  part. 

WITNESSETH  : 

1.   That,  for  and  in  consideration  of  the  sum  of 
one  doUar,  the  receipt  of  which  is  hereby  acknowl- 
edged by  each  of   the  second  parties,  and  of   the 
Sale  and         covenants  and  agreements  herein  contained,   each 
Delivery         of  the  second  parties  hereby  sells  and  conveys,  and 
of  Fruit.  agrees  to  pick,  haul,  and  deliver  to  the  first  party,  at 

its  packing-house  at ,  in  said  State,  for 

the  purpose  of  packing,  selling,  and  marketing,  all 
the  citrus  fruits  now  growing  upon  his  land  and 
premises,  and  all  that,  during  the  term  of  this  agree- 
ment, may  be  grown  upon  his  lands  and  premises, 
or  any  other  lands  or  premises  owned  by  him  and 

situated  in  the  County  of ,  said  State, 

at  such  time  or  times,  and  from  time  to  time,  and  in 


34 


Cooperation  in  Agriculture 


such  quantities,  as  the  first  party,  or  its  agent,  may 
direct. 

2.  The  first  party  agrees  to  receive,  pack,  sell. 
Packing  and  and  market  all  of  said  fruit  whenever  a  market  may 
Marketing,     be  found  for  the  same,  which,  in  the  judgment  of  the 

first  party  and  in  accordance  with  its  rules  and  regu- 
lations, shall  justify  such  seUing  and  shipment. 

3.  The  first  party  agrees  to  pay  to  each  of  the 
second  parties   the  amount  received  for  his   said 

Proceeds.  fruit,  less  its  regular  charges  for  packing,  shipping, 
selUng,  and  marketing  the  same. 

4.  If  any  of  the  second  parties  shall,  in  good 
Withdrawal  faith,  sell  his  said  lands,  or  any  part  thereof,  he  shall 
of  Land.         be  released  from  this  agreement  as  to  all  lands  sold 

and  conveyed,  upon  giving  notice  in  writing  thereof 
to  the  first  party. 

5.  This  agreement  shall  continue  in  full  force 
Term  of  and  effect  from  the  date  hereof  until  November  1st 
Agreement,    of  the  year  of  the  date  hereof,  and  for  a  further  term 

next  thereafter  of  five  (5)  years. 

6.  Any  of  the  second  parties  to  this  agreement 
may  be  released  therefrom  and  terminate  and  end 

Suspension  the  same  as  to  him,  by  filUng  a  written  notice  of  his 
of  Agree-  desire  to  be  so  released,  with  the  party  of  the  first 
ment.  part,  during  the  first  fifteen  (15)  days  of  August  of 

any  year  during  the  term  of  this  agreement. 

7.  The  by-laws  of  the  first  party  and  the  contract 
between  the  first  party  and  its  local  exchange  and 
the  contract  between  such  local  exchange  and  the 
shall  be  parts  of  this  agreement  and 

By-laws.  shall  be  binding  upon  each  of  the  second  parties 
except  in  those  particulars  in  which  it  is  expressly 
herein  stipulated  to  the  contrary. 

8.  The  packing,  selling,  and  marketing  of  the  said 
Rules  and  fruit  shall  be  done  in  accordance  with  the  rules  and 
Regulations,  regulations  of  the  first  party  now  or  hereafter  adopted 

and  observed  by  it.- 


Fundamentals  in  Cooperation 


35 


9.  Each  of  the  second  parties  fully  understands 
that  the  purpose,  among  others,  of  this  agreement, 
is  to  maintain  and  to  increase  to  its  greatest  effi- 
ciency the  present  cooperative  frmt-selling  and  mar- 
keting agency  known  as  the ,  whose 

stockholders  are  the  representatives  of  various  sub- 
exchanges,  and  the  stockholders  of  which  said  sub- 
exchanges  are  the  representatives  of  the  various 
and  numerous  fruit  associations  of  the  State  of 
California,  of  which  the  first  party  is  one ;  and  that 

Purpose.  to  accomplish  this  purpose  it  is  necessary  that  each 
of  the  parties  of  the  second  part  shall  strictly  and 
fully  comply  with  and  perform  the  stipulations  of 
this  agreement  on  his  part,  and  therefore,  each  of 
the  second  parties  expressly  stipulates  and  agrees 
that  he  will  not  sell  or  otherwise  dispose  of  his  said 
fruit  to  any  person  or  corporation  other  than  to 
said  first  party,  as  herein  provided ;  and  that  in 
case  he  shall  fail,  refuse,  or  delay  to  pick  and  deliver 
his  said  fruit  to  the  first  party,  within  five  (5)  days 
after  demand  therefor,  the  first  party  shall  have  the 
right,  at  its  option,  at  any  time  or  times  thereafter, 
and  from  time  to  time,  to  enter  into  the  possession 

Possession,  of  his  said  premises  and  to  pick  his  said  fruit,  or  any 
part  thereof,  and  take  the  same  to  the  packing-house 
of  the  first  party,  and  pack,  seU,  and  market  the 
same,  all  at  his  cost  and  expense,  which  said  cost  and 
expense  shall  and  may  be  retained  by  the  first  party 
out  of  any  monies  received  from  the  sale  of  any  of 
his  fruit. 

10.  The  actual  damages  which  wiU  be  sustained 
by  the  first  party  because  of  the  failure  or  refusal 
of  any  of  the  second  parties  to  pick  and  deUver  his 
said  fruit  as  herein  provided,  and  the  further  detri- 
ment and  injury  to  the  first  party  because  of  the 

effect  of  said  breach  upon  the and 

its  efficiency,  and  the  expenses  to  which  the  first 


36  Cooperation  in  Agriculture 

party  will  be  put,  and  the  damage  caused  by  out- 
lays incurred  and  to  be  incurred  by  it  in  providing 
means  for  selling  and  marketing  the  said  fruit,  are 
impossible  now  to  estimate  or  fix,  and,  therefore, 
the  same  are  estimated  and  agreed  upon  as  twenty- 
five  cents  (25*')  for  each  box  of  fruit  grown  or  sold, 
liquidated      which  sum  shaU  be  allowed  in  any  action  brought 
Damages.       by  the  first  party  to  recover  damages  for  the  breach 
of  this  agreement  by  any  of  the  second  parties,  should 
the  first  party  elect,  as  it  may  elect,  to  bring  such 
action. 
In  witness  whereof,  the  said  corporations  have  each  here- 
unto caused  its  corporate  name  and  seal  to  be  affixed  by  its  Presi- 
dent and  Secretary  duly  authorized  by  resolution  of  its  Board 
of  Directors,  duly  passed  and  adopted,  and  all  other  parties  have 
hereunto  signed  their  individual  names  and  affixed  their  individ- 
ual seals. 

Association. 


By 

President. 

By 

Secretary. 

owning acres. 

owning acres. 


MANAGEMENT 

The  success  of  a  cooperative  organization  depends  on 
the  loyalty  and  earnestness  of  the  members  and  on  the 
efficiency  of  the  management.  As  usually  handled,  the 
powers  of  a  cooperative  association  are  vested  in  a  board 
of  directors  who  manage  and  control  its  affairs  through 
officers  or  agents  appointed  by  it  and  subject  to  its  ad- 
vice and  direction.    A  cooperative  business  organization 


Fundamentals  in  Cooperation  37 

cannot  be  handled  successfully  by  a  board  of  directors. 
The  commission  form  of  government  without  a  respon- 
sible leader  cannot  be  applied  to  it.  It  requires  a  man- 
ager who  is  competent  to  assume  the  general  direction 
of  its  business.  Like  any  other  successful  manager,  he 
must  possess  business  ability  of  high  order,  sterling  integ- 
rity, and  tact  and  judgment  in  dealing  with  men  and 
affairs.  The  manager  selected  may  be  a  man  of  adminis- 
trative experience,  or  he  may  be  selected  and  developed 
from  the  membership.  The  latter  policy  is  frequently 
followed  in  the  formation  of  these  associations.  This, 
however,  is  often  a  dangerous  experiment,  and  innumer- 
able cooperative  associations  have  been  wrecked  as  a 
result  of  the  inexperience  and  incompetence  of  the  aver- 
age producer  who  assumes  the  duties  of  a  general  business 
manager. 

Difficulties  in  Management 

A  cooperative  organization  is  more  difficult  to  manage 
than  an  ordinary  corporation.  In  the  latter,  the  stock- 
holders do  not  often  take  an  active  interest  in  its  manage- 
ment because  they  are  not  experts  in  the  business  of  the 
corporation.  They  select  a  manager  and  hold  him  re- 
sponsible for  the  development  and  execution  of  their 
policies,  but  when  a  farmers'  organization  is  formed,  the 
farmer  is  an  expert  in  its  affairs  to  a  greater  or  less  extent 
and  he  may  feel  that  he  is  capable  of  handling  the  organi- 
zation, or,  at  least,  of  giving  active  advice  regarding  the 
details  of  its  methods.  This  trait  is  a  valuable  asset  in 
a  farmers'  organization  provided  the  manager  is  big  enough 
and  broad  enough  and  has  sufficient  skill  to  utilize  it ;  and 


38  Cooperation  in  Agriculture 

herein  lies  the  vuhierable  spot  in  the  average  farmers' 
cooperative  business  association.  There  are  two  extremes 
in  the  methods  of  managing  a  cooperative  organization  of 
farmers :  one  is  the  method  in  which  the  manager  be- 
comes an  arbitrary  dictator  in  developing  and  executing 
the  policies  of  the  association  similar  to  the  method  in 
many  stock  corporations ;  in  the  other,  the  directors  es- 
tablish the  policies  and  execute  them  through  a  clerical 
assistant.  Either  system  is  almost  certain  to  fail  in  the 
end.  Neither  is  founded  on  principles  that  are  adapted 
to  a  farmers'  cooperative  organization. 

Between  these  two  extremes  lies  the  successful  method 
of  management.  The  manager  who  succeeds  is  he  who 
holds  the  confidence  of  the  directors  and  the  interest  of 
the  members,  who  utilizes  the  suggestions  of  the  directors 
and  of  the  members  and  who  shapes  them  into  a  working 
policy,  who  acts  on  matters  of  policy  only  after  the  ap- 
proval of  the  directors,  and  who,  at  the  same  time,  takes 
the  initiative  in  the  development  of  a  progressive,  con- 
structive business  policy  for  the  directors  to  adopt.  On 
the  other  hand,  the  manager  who  fails  to  hold  the  confi- 
dence of  the  directors  or  the  members,  who  becomes  a 
dictator  of  the  policies  and  thereby  drifts  away  from  the 
spirit  of  the  organization,  or  who  is  merely  a  clerk  to  carry 
out  the  undeveloped  business  policies  which  a  board  of 
directors  acting  alone  is  likely  to  develop  will  invariably 
fail. 

Again,  from  the  standpoint  of  the  association  itself, 
no  cooperative  organization  can  succeed  if  the  directors 
are  unwilling  to  place  its  business  management  in  the 
hands  of  a  strong,  aggressive,  thoroughly  experienced, 


Fundamentals  in  Cooperation  39 

well-paid  man  and  to  carry  out  all  of  its  policies  through 
him  alone.  Whenever  a  director  or  member  assumes 
the  duties  of  the  manager  either  openly  or  by  indirection, 
the  association  is  bound  to  face  a  serious  internal  situa- 
tion. Of  all  the  different  factors  that  have  been  con- 
tributory, no  single  factor,  unless  it  is  disloyalty  of  the 
members  themselves  or  the  meddling  of  members  in  the 
duties  of  management,  has  operated  so  strongly  against 
the  success  of  farmers'  business  associations  as  the  low- 
salaried,  inexperienced,  incompetent  managers  selected 
by  the  directors  to  handle  these  organizations.  This 
position  is  not  a  place  to  be  filled  by  a  popular  local  leader 
who  has  often  failed  in  business,  or  who  has  been  only 
moderately  successful.  There  are  many  association  man- 
agers of  this  type.  They  are  "good  fellows,"  but  they 
often  stand  in  the  way  of  real  progress  in  the  cooperative 
movement  because  they  have  none  of  the  elements  of 
leadership  or  do  not  possess  convictions  of  a  kind  that 
lead  to  the  upbuilding  of  the  cooperative  method.  The 
organization  must  meet  on  every  hand  the  competition 
of  organized  capital.  It  has  large  questions  confronting 
it.  The  influence  of  the  manager,  next  to  the  loyalty 
of  the  members,  exceeds  all  other  influences,  and  the  suc- 
cess of  the  undertaking  depends  upon  his  skill  and  ability 
in  developing,  with  the  directors  and  members,  a  con- 
structive business  policy  that  is  able  to  meet  these  condi- 
tions as  they  arise. 


CHAPTER  in 

LEGAL  FEATURES  OF  COOPERATIVE  ORGANI- 
ZATIONS IN  AGRICULTURE 

A  COOPERATIVE  Organization  is  one  that  conducts  its 
operations  for  the  benefit  of  its  members.  The  voting 
power  of  the  members  is  equal  or  proportional  to  the 
amount  of  business  transacted  through  the  association. 
The  distribution  of  its  earnings  is  based  upon  the  amount 
of  business  transacted  for  each  member,  upon  the  amount 
of  property  bought  from  or  sold  to  the  members,  or  in 
proportion  to  other  service  rendered  by  each  member. 
Its  operations  are  conducted  at  cost ;  all  the  surplus  earn- 
ings are  distributed  pro  rata  to  those  who  have  used  the 
facilities  of  the  organization  in  the  conduct  of  their  busi- 
ness operations,  after  operating  expenses,  depreciation 
on  property,  a  reserve,  and  the  usual  rate  of  interest  on 
the  capital  invested  in  the  property  have  been  deducted. 
A  cooperative  organization  differs  fundamentally  from 
the  usual  stock  corporation  formed  for  profit  in  that  that 
capital  invested  in  the  latter  is  the  basis  of  administration, 
control,  and  of  the  distribution  of  surplus  earnings.  In 
the  former,  the  basis  of  control  is  the  membership.  The 
stock  corporation  for  profit  performs  its  function  in  order 
that  the  capital  invested  by  the  stockholders  may  earn 
a  dividend.     As  organized  in  the  United  States,  a  coopera- 

40 


Cooperative  Organizations  in  Agriculture        41 

tive  association  may  or  may  not  have  capital  stock.  If 
formed  as  a  stock  corporation  for  profit  by  farmers  and 
managed  under  the  principles  of  a  stock  corporation,  it  is 
not  different  from  any  other  capital  stock  corporation. 
If,  however,  it  is  formed  as  a  capital  stock  corporation, 
it  may  still  be  cooperative  if  the  law  under  which  it  is 
incorporated  defines  the  methods  of  voting,  the  transfer 
of  stock,  the  limitation  in  membership,  and  the  distribu- 
tion of  surplus  earnings  on  cooperative  principles,  or  if 
it  permits  the  members  through  its  charter  and  by-laws 
to  manage  its  affairs  along  cooperative  lines.  In  a  coopera- 
tive organization  formed  as  a  capital  stock  corporation, 
the  capital  invested  as  already  pointed  out  should  earn 
the  usual  rate  of  interest,  and  after  operating  expenses, 
depreciation,  and  a  reserve  are  deducted,  the  earnings  are 
distributed  wholly  or  in  part  in  proportion  to  the  business 
transacted  through  the  corporation  or  in  proportion  to 
other  service  rendered  by  each  member. 

From  the  legal  standpoint,  there  has  been  little  attempt 
by  the  states  to  define  a  cooperative  organization,  nor  is 
it  permissible  under  the  laws  of  many  of  the  states  to 
limit  the  rights  of  members  or  to  define  the  distribution 
of  the  surplus  earnings  along  the  lines  set  forth  in  the  pre- 
ceding paragraphs.  As  a  general  rule,  any  organization 
formed  by  farmers  is  likely  to  be  called  cooperative,  though 
it  may  be  incorporated  as  a  stock  corporation  for  profit,  as 
a  partnership,  or  as  a  non-profit  corporation  without  capi- 
tal stock.  In  the  absence  of  legal  definition,  it  is  there- 
fore impossible  to  secure  comprehensive  data  covering 
the  extent  of  the  so-called  cooperative  organizations  in 
the  United  States. 


42  Cooperation  in  Agriculture 


THE  DIFFICULTY  OF  ORGANIZING  UNDER  PRESENT  LAWS 

Under  the  corporation  laws  of  most  of  the  states,  it  is 
generally  impossible  to  organize  a  business  agricultural 
association  on  a  non-profit  cooperative  basis.  The  method 
of  handling  an  organization  must  conform  to  the  laws  of 
the  state.  They  must  be  consistent  with  the  federal 
statutes  and  with  the  articles  of  incorporation.  The  laws 
that  govern  an  organization  for  pecuniary  profit  have  been 
enacted  primarily  to  meet  the  needs  of  capital,  not  those 
of  agricultural  non-profit  corporations.  The  laws  re- 
lating to  non-profit  corporations  usually  cover  religious, 
fraternal,  social,  scientific,  educational,  benevolent,  or 
charitable  institutions,  or  other  similar  associations. 

The  laws  governing  the  formation  of  membership 
corporations  or  partnerships  are  not  adapted  to  the 
formation  of  agricultural  non-profit  cooperative  organiza- 
tions. The  money  contributed  by  each  member  to  es- 
tablish and  maintain  the  business  of  these  membership 
corporations  or  partnerships  may  be  fixed  by  mutual 
agreement  among  the  members.  The  money  required 
for  operating  expenses  in  many  of  the  farmers'  organiza- 
tions is  raised  by  withholding  certain  percentages  from 
the  products  marketed  and  not  by  assessment  on  the 
capital  contributed  by  each  or  by  proportional  assess- 
ments of  the  members.  These  laws  are  therefore  not 
adapted  to  the  organization  and  management  of  associa- 
tions formed  on  the  cooperative  plan. 

In  stock  corporations  formed  for  pecuniary  profit,  the 
voting  power  of  the  member  is  proportional  to  the  number 
of  shares  held  by  each  member,  though  in  some  states 


Cooperative  Organizations  in  Agriculture        43 

the  legislatures  have  placed  a  limit  on  the  number  of  votes 
that  each  stockholder  may  cast.  This  is  a  right  fixed  by 
the  statute.  The  right  to  sell  and  transfer  the  stock 
is  incident  to  the  ownership.  It  also  is  a  statutory  right 
and  not  subject  to  the  control  of  the  corporation,  though 
the  corporation  may  have  the  first  option  to  buy  the  stock 
whenever  a  member  desires  to  sell.  The  ordinary  cor- 
poration law  is  therefore  inadequate  to  meet  the  require- 
ments of  the  farmers'  cooperative  organization.  In  these 
associations,  it  may  be  desirable  to  make  the  voting  power 
of  members  equal,  or  proportional  to  the  product  contrib- 
uted, or  to  the  acreage,  or  to  the  service  rendered  by 
each  member.  The  membership  in  these  associations  is 
confined  exclusively  to  producers  and  should  not  be  trans- 
ferable except  under  rules  legally  provided  by  the  associa- 
tions. These  restrictions  are  non-enforceable  under  the 
usual  stock  corporation  laws. 

Many  of  the  so-called  farmers'  cooperative  organiza- 
tions have  been  formed  under  the  stock  corporation  laws 
of  the  different  states.  The  control  of  the  membership 
therefore  becomes  impossible  unless  legally  provided 
otherwise,  and  there  is  no  way  in  which  a  stockholder 
can  be  separated  from  the  corporation  when  he  withdraws. 
He  may  sell  his  farm  and  continue  as  a  member  until 
he  sells  his  stock.  He  can  dispose  of  it  to  any  one  who  will 
purchase  it,  though  many  associations  provide  that  the 
stock  of  a  withdrawing  member  shall  first  be  offered  to 
the  association,  a  provision  which  is  of  no  value  when  the 
association  is  not  financially  able  to  buy  the  stock;  or, 
if  he  retains  it,  he  may  become  identified  with  a  rival 
organization  and  still  be  entitled  to  know  all  about  the 


44  Cooperation  in  Agriculture 

business  of  the  former  organization,  since  the  stockholder, 
as  a  general  rule,  has  the  right  to  inspect  the  books  of  the 
corporation,  if  it  is  done  for  a  specified  and  proper  purpose. 
As  a  result  of  the  withdrawal  of  members  through  the 
sale  of  the  farms  or  in  other  ways  and  the  transfer  of  stock, 
the  control  of  cooperative  associations  organized  under 
the  general  corporation  laws  in  different  states  has  often 
passed  into  the  hands  of  rivals  in  business  and  of  non- 
producers.  In  most  of  the  states,  there  is  no  legal  way 
in  which  this  result  can  be  avoided  when  farmers'  or- 
ganizations are  formed  as  stock  corporations  for  pecuniary 
profit. 

The  organization  formed  for  pecuniary  profit  may,  on 
the  other  hand,  inflict  a  hardship  on  the  stockholder  who 
is  no  longer  a  producer  by  assessing  the  stock,  which  assess- 
ment he  would  legally  be  required  to  pay,  but  the  benefits 
of  which  he  could  not  enjoy,  because  he  would  no  longer 
market  his  product  through  the  organization. 

NEW   LEGISLATION   NEEDED 

To  meet  the  needs  of  the  farmers'  business  cooperative 
organization,  new  legislation  is  needed  in  most  of  the 
states  which  will  permit  the  formation  of  corporations 
under  which  business  may  be  conducted  on  the  cooperative 
plan.  Laws  of  this  kind  have  already  been  enacted  in 
several  of  the  states,  notably,  California,  Wisconsin, 
Nebraska,  and  Minnesota.  In  England,  the  cooperative 
trading  associations  are  organized  under  "  The  Industrial 
and  Provident  Societies'  Act,"  and  the  cooperative  credit 
societies  under  "The  Friendly  Societies'  Act." 


Cooperative  Organizations  in  Agriculture        45 

The  Wisconsin  Law 

In  Wisconsin,  a  law  was  passed  in  1911,  Chapter  368, 
Laws  of  1911,  which  provides  for  the  formation  of  "a, 
cooperative  association,  society,  company,  or  exchange, 
for  the  purpose  of  conducting  agricultural,  dairy,  mercan- 
tile, mining,  manufacturing,  or  mechanical  business  on 
the  cooperative  plan,"  It  "may  buy,  sell,  and  deal  in 
the  product  of  any  other  cooperative  company  heretofore 
organized  or  hereafter  organized"  as  a  cooperative  asso- 
ciation. The  law  provides  that  "no  stockholder  in  any 
such  association  shall  own  shares  of  a  greater  par  value 
than  one  thousand  dollars  ...  or  be  entitled  to  more 
than  one  vote."  It  provides  that  the  directors  shall 
apportion  the  earnings,  subject  to  revisions  by  the  asso- 
ciation at  any  time,"  by  first  paying  dividends  on  the  paid- 
up  capital  stock  not  exceeding  six  per  centum  per  annum, 
then  setting  aside  not  less  than  ten  per  centum  of  the  net 
profits  for  a  reserve  fund  until  an  amount  has  been  accu- 
mulated in  said  reserve  fund  equal  to  thirty  per  centum 
of  the  paid-up  capital  stock,  and  five  per  cent  thereafter 
for  an  educational  fund  to  be  used  in  teaching  cooperation, 
and  the  remainder  of  said  net  profits  by  uniform  dividend 
upon  the  amount  of  purchases  of  shareholders  and  upon 
the  wages  and  salaries  of  employees,  and  one-half  of  such 
uniform  dividend  to  non-shareholders  on  the  amount  of 
their  purchases,  which  may  be  credited  to  the  account  of 
such  non-shareholders  on  account  of  capital  stock  of  the 
association;  but  in  productive  associations  such  as 
creameries,  canneries,  elevators,  factories,  and  the  like, 
dividends  shall  be  on  raw  material  delivered  instead  of  on 


46  Cooperation  in  Agriculture 

goods  purchased.  In  case  the  association  is  both  a  selling 
and  a  production  concern,  the  dividends  may  be  on  both 
raw  material  delivered  and  on  goods  purchased  by  the 
patrons."  The  law  provides  that  no  corporation  or  asso- 
ciation doing  business  for  profit  shall  be  entitled  to  the 
use  of  the  term  "cooperative"  as  part  of  its  corporate 
or  business  name  unless  it  has  complied  with  the  provi- 
sions of  the  act. 

The  Nebraska  Law 

In  Nebraska,  a  law.  Senate  File  No.  88,  defines  coopera- 
tive associations  and  gives  cooperation  a  definite  legal 
status.  The  law  says,  "for  the  purpose  of  this  act,  the 
words  'cooperative  company,  corporation,  or  association' 
are  defined  to  mean  a  company,  corporation,  or  associa- 
tion which  authorizes  the  distribution  of  its  earnings  in 
part  or  wholly,  on  the  basis  of,  or  in  proportion  to,  the 
amount  of  property  bought  from  or  sold  to  members,  or 
of  labor  performed,  or  other  service  rendered  to  the  cor- 
poration." It  differs  from  the  general  incorporation 
law  of  Nebraska  by  providing  that  every  cooperative 
corporation  has  the  power  "to  regulate  and  limit  the 
right  of  stockholders  to  transfer  their  stock ;  and  to  make 
by-laws  for  the  management  of  its  affairs,  and  to  provide 
thereon  the  term  and  limitation  of  stock  ownership,  and 
for  the  distribution  of  its  earnings." 

The  California  Law 

In  California,  a  law  has  been  enacted  relating  to  the 
incorporation,   organization,  management,  and   coopera- 


Cooperative  Organizations  in  Agriculture        47 

tion  of  agricultural,  viticultural,  and  horticultural  non- 
profit associations.     The  law  provides  that :  — 

"Such  association  shall  not  have  a  capital  stock,  and 
its  business  shall  not  be  carried  on  for  profit.  Any  person 
or  any  number  of  persons,  in  addition  to  the  original 
incorporators,  may  become  members  of  such  association, 
upon  such  terms  and  conditions  as  to  membership,  and 
subject  to  such  rules  and  regulations  as  to  their,  and  each 
of  their,  contract  and  other  rights  and  liabilities  between 
it  and  the  member,  as  the  said  association  shall  provide 
in  its  by-laws.  The  association  shall  issue  a  certificate 
of  membership  to  each  member,  but  the  said  membership, 
or  the  said  certificate  thereof,  shall  not  be  assigned  by  a 
member  to  any  other  person,  nor  shall  the  assigns  thereof 
be  entitled  to  membership  in  the  association,  or  to  any 
property  rights  or  interests  therein.  Nor  shall  a  pur- 
chaser at  execution  sale,  or  any  other  person  who  may 
succeed  by  operation  of  law  or  otherwise  to  the  property 
interests  of  a  member,  be  entitled  to  membership,  or  be- 
come a  member  of  the  association  by  virtue  of  such  trans- 
fer. The  board  of  directors  may,  however,  by  motion 
duly  adopted  by  it,  consent  to  such  assignment  or  transfer 
and  to  the  acceptance  of  the  assignee  or  transferee  as  a 
member  of  the  association,  but  the  association  shall  have 
the  right,  by  its  by-laws,  to  provide  for  or  against  the 
assignment  of  membership  certificates,  and  also  the  terms 
and  conditions  upon  which  any  such  transfer  or  assign- 
ment shall  be  allowed." 

The  California  law  states  that,  "whether  the  voting 
power  and  property  rights  and  interests  of  each  member 
shall  be  equal  or  unequal,  and  if  unequal  the  articles 


48  Cooperation  in  Agriculture 

shall  set  forth  a  general  rule  or  rules  applicable  to  all 
members  by  which  the  voting  power  and  the  property 
rights  and  interests,  respectively,  of  each  member  may  and 
shall  be  determined  and  fixed,  but  the  association  shall 
have  power  to  admit  new  members  who  shall  be  entitled 
to  vote  and  to  share  in  the  property  of  the  association 
with  the  old  members,  in  accordance  with  such  general 
rule.  This  provision  of  the  articles  of  incorporation  shall 
not  be  altered,  amended,  or  repealed  except  by  unanimous 
written  consent  or  the  vote  of  all  the  members." 

Under  the  California  law  each  association  may  by  its 
by-laws  approve  — 

"  The  amount  of  membership  fee,  if  any,  and  the  amount  which 
each  member  shall  be  required  to  pay  annually,  or  from  time  to 
time,  if  at  all,  to  carry  on  the  business  of  the  association. 

**  The  number  and  qualifications  of  members  of  the  association 
and  the  conditions  precedent  to  membership  and  the  method, 
time,  and  manner  of  permitting  members  to  withdraw,  and  pro- 
viding for  the  assignment  and  transfer  of  the  interest  of  mem- 
bers, and  the  manner  of  determining  the  value  of  such  interest 
and  providing  for  the  purchase  of  such  interest  by  the  associa- 
tion upon  the  death,  withdrawal,  or  expulsion  of  a  member  or  upon 
the  forfeiture  of  his  membership,  at  the  option  of  the  association. 

"  Permitting  members  to  vote  by  their  proxies,  and  determin- 
ing the  conditions,  manner,  form,  and  effect  thereof.'' 

Each  association  shall  also  have  the  power  — 

"  To  appoint  such  agents  and  ofi&cers  as  its  business  may  re- 
quire, and  such  appointed  agents  may  be  either  persons  or  cor- 
porations ;  or  admit  persons  to  membership  in  the  association, 
and  to  expel  any  member  pursuant  to  the  provisions  of  its  by- 
laws ;  to  forfeit  the  membership  of  any  member  for  violation  of 
any  agreement  between  him  and  the  association,  or  for  his  viola- 
tion of  its  by-laws. 


Cooperative  Organizations  in  Agriculture        49 

"  To  purchase  or  otherwise  acquire,  hold,  own,  sell,  and  other- 
wise dispose  of  any  and  every  kind  or  kinds  of  real  and  personal 
property  necessary  to  carry  on  its  business,  and  to  acquire  by 
purchase  or  otherwise  the  interest  of  any  member  in  the  property 
of  the  association. 

"  Upon  the  written  assent  or  by  a  vote  of  members  represent- 
ing two-thirds  of  the  total  votes  of  aU  members  to  cooperate 
with  any  other  cooperative  corporation  or  corporations  for  the 
cooperative  and  more  economical  carrying  on  of  their  respective 
businesses,  by  consolidation  as  provided  in  section  653  i  of  this 
code,  whereupon  the  effect  of  such  consohdation  shall  be  the  same 
as  declared  in  said  section ;  or  upon  resolution,  adopted  by  its 
board  of  directors,  to  enter  into  all  necessary  and  proper  con- 
tracts and  agreements,  and  to  make  all  necessary  and  proper 
stipvdations  and  arrangements  with  any  other  cooperative  cor- 
poration or  corporations  for  the  cooperative  and  more  eco- 
nomical carrying  on  of  its  business,  or  any  part  or  parts  thereof  ; 
or  any  two  or  more  cooperative  corporations  organized  under 
this  title,  upon  resolutions,  adopted  by  their  respective  boards  of 
directors,  may,  for  the  piu*pose  of  more  economically  carrying  on 
their  respective  businesses,  by  agreement  between  them,  unite  in 
employing  and  using,  or  several  associations  may  separately  em- 
ploy and  use,  the  same  methods,  means  and  agencies  for  carry- 
ing on  and  conducting  their  respective  businesses." 

In  some  of  the  states,  an  effort  is  now  being  made  to 
reorganize  on  a  non-profit  basis  some  of  the  farmers'  asso- 
ciations that  were  formerly  organized  under  the  stock 
corporation  laws.  The  reorganization  presents  many 
difficulties.  Two  general  methods  are  being  followed  in 
bringing  it  about.  When  legally  possible  to  do  so,  it  is 
effected  by  amending  the  articles  of  incorporation  under 
which,  the  association  was  originally  formed  along  the 
lines  desired.  When  the  articles  are  not  subject  to  amend- 
ment, the  corporation  has  to  be  dissolved,  a  new  corpora- 


50  Cooperation  in  Agriculture 

tion  is  then  formed  on  a  non-profit  basis,  and  it  may  take 
over  the  property  and  interests  of  the  former  corporation. 

PRINCIPLES  TO   BE  INCLUDED   IN   NEW   LAWS 

Those  who  are  interested  in  the  cooperative  movement 
should  have  the  corporation  laws  of  each  state  examined 
to  determine  whether  their  provisions  permit  the  organiza- 
tion of  farmers'  associations  on  the  cooperative  plan.  If 
the  laws  are  found  to  be  inadequate,  new  legislation  may 
be  enacted  embodying  the  fundamental  features  set 
forth. 

The  present  corporation  laws  of  many  states  may  be 
used  as  a  basis  for  a  new  law.  If  this  policy  is  followed, 
the  cooperative  corporation  should  be  given  under  the 
new  law  the  right  to  regulate  and  limit  the  right  of  stock- 
holders to  transfer  their  stock,  and  to  make  by-laws  for 
the  managements  of  its  business,  to  regulate  the  limitation 
of  stock  ownership,  and  to  provide  the  method  of  dis- 
tributing its  surplus  earnings.  Whether  these  provisions 
shall  be  set  forth  in  the  law,  as  they  have  been  to  a  greater 
or  less  extent  in  Wisconsin,  or  left  for  the  corporation  to 
provide  in  its  by-laws  as  they  have  been  in  Nebraska, 
is  a  detail  to  be  considered  in  each  state. 

If  a  new  law  is  to  be  enacted  to  cover  a  non-profit, 
non-stock  corporation,  the  features  of  the  California  law, 
together  with  the  articles  of  incorporation  and  by-laws 
given  on  other  pages,  will  be  suggestive.  Whatever  the 
form  of  organization,  it  should  be  remembered  that  to 
be  cooperative,  the  aim  of  the  association  should  not  be 
pecuniary  profit.  The  capital  stock  and  dividends  should 
therefore  be  limited,  if  it  is  a  capital  stock  corporation ; 


Cooperative  Organizations  in  Agriculture        51 

the  methods  of  distributing  the  surplus  earnings  should 
be  under  the  legal  control  of  the  members,  or  should  be 
defined  by  the  statute ;  the  dividends  on  stock,  if  paid  at 
all,  should  usually  not  exceed  the  customary  rate  of  in- 
terest ;  after  a  reasonable  reserve  is  retained,  the  basis  of 
distributing  the  remaining  surplus  should  be  proportional 
to  the  product  contributed  or  to  other  service  rendered 
by  each  member ;  and  the  voting  power  of  the  members 
should  be  equal,  if  possible,  or  proportional  to  the  amount 
of  product  contributed  by  each  member  or  to  other  serv- 
ice rendered. 


CHAPTER  IV 

THE  ORGANIZATION   OF   A    FARMERS'   COOP- 
ERATIVE ASSOCIATION 

The  first  step  in  organizing  a  cooperative  association 
is  to  secure  a  charter  from  the  state,  following  the  method 
prescribed  by  the  law  under  which  the  charter  is  secured. 
The  application  for  a  charter,  which  is  generally  made  to 
the  Secretary  of  State,  usually  sets  forth  the  name  of  the 
proposed  association,  its  general  nature  and  purpose,  the 
term  for  which  it  is  to  exist,  the  place  of  business,  the 
number  and  names  of  the  directors,  the  amount  of  capital 
stock,  and  such  other  matters  as  may  be  required  under 
the  law. 

CHARTER   OF  A   CITRUS   FRUIT  ASSOCIATION 

In  order  to  show  some  of  the  features  to  be  provided 
in  a  charter,  the  following  articles  of  incorporation  set 
forth  what  is  included  in  the  charter  of  some  of  the  non- 
profit cooperative  citrus  fruit  marketing  organizations 
in  California.  Provisions  of  a  similar  nature,  though  of 
course  varying  in  details  for  different  kinds  of  business, 
will  need  to  be  incorporated  in  a  charter  taken  out  for 
any  business  cooperative  corporation. 

52 


Organization  of  an  Association  53 

ARTICLES  OF  INCORPORATION 

OF  THE 

ASSOCIATION 


,  CALIFORNIA. 

We,  the  undersigned,  a  majority  of  -whom  are  citizens  and 
residents  of  the  State  of  CaUfornia,  have  this  day  voluntarily 
associated  om-selves  together  as  an  incorporation  under  the  laws 
of  the  State  of  California  providing  for  the  incorporation  of 
Agricultural  and  Horticultural  non-profit  cooperative  associa- 
tions, and  we  hereby  adopt  the  following  Articles  of  Incorpora- 
tion: 

First,  The  name  of  the  said  incorporation  shall  be = 

Association. 

Second,  The  purpose  for  which  it  is  formed  is  without  profit 
and  without  capital  stock  to  transact  the  business  of  receiving, 
curing,  packing,  and  marketing  oranges,  lemons,  and  other  citrus 
fruits  grown  by  or  under  the  control  of  the  members  of  this  as- 
sociation in  the  vicinity  of  and  tributary  to  the  packing-house 
of  this  association  at ,  California ;  and  inciden- 
tally thereto  to  buy,  own,  mortgage,  sell,  or  lease  sufficient  real 
estate  for  the  proper  transaction  of  its  business,  to  erect  thereon 
a  packing-house  and  all  other  buildings  appurtenant  thereto  : 

To  acquire,  own,  hold,  sell,  assign,  or  hypothecate  any  stock  or 
bonds  of  any  other  incorporation  which  may  operate  in  connec- 
tion with  this  corporation  or  its  members  either  in  furnishing 
orchard  or  packing-house  suppUes ;  marketing  its  products  or 
aflfiUated  in  packing  operations. 

And  after  deducting  actual  cost  of  operation  to  distribute  the 
net  proceeds  of  all  fruit  received,  handled,  and  sold  among  its 
members  pro  rata  according  to  the  amount,  variety,  and  grade 
of  fruits  furnished  by  its  members  respectively  under  such  system 
of  pools  as  may  be  from  time  to  time  established  by  the  Directors. 

Third,  The  place  where  its  principal  business  will  be  trans- 
acted is ,  California. 


64  Cooperation  in  Agriculture 

PouBTH,  The  term  for  wliich  it  is  to  exist  is  fifty  years. 
Fifth,  The  number  of  directors  of  this  corporation  shall  be 
who  shall  continue  to  hold  office  until  their  suc- 


cessors are  chosen  and  quaUfied ;  and  the  names  and  residences 
of  those  selected  for  the  first  year  and  until  their  successors  shall 
have  been  elected  and  accepted  office  shall  be 

of ,  California. 

of ,  California. 


Sixth,  The  voting  power  and  the  property  rights  and  interests 
of  its  members  shall  not  be  equal,  but  on  the  contrary  members 
will  contribute  to  the  investment  necessary  for  operation  in  the 
true  proportion  that  the  number  of  bearing  acres  of  citrus  or- 
chards owned  or  controlled  by  each  member  respectively  bears 
to  the  whole  number  of  bearing  acres  from  which  citrus  fruits  are 
deUvered  or  engaged  to  be  deUvered  to  this  association  any  time 
during  the  year  such  memberships  are  issued ;  and  the  voting 
power,  property  right,  and  interest  of  each  member  shall  be  in 
the  proportion  of  such  contribution,  and  imder  this  rule  this 
association  shall  have  power  to,  from  time  to  time,  admit  new 
members  who  shall  be  entitled  to  vote  and  to  share  in  the  prop- 
erty of  this  corporation  the  same  as  the  old  members. 

Seventh,  A  certificate  of  membership  shall  be  issued  to  each 
member  of  this  corporation  which  shall  not  be  assignable  or  en- 
title the  assignee  to  any  voting  power,  property  right,  or  interest 
except  as  may  be  provided  by  the  by-laws  of  this  corporation. 

In  witness  whereof.  We  have  hereunto  set  our  hands  and 
seals  this day  of 1911. 


State  of  Califomia 
County  of 


.(seal) 
.(seal) 


ss. 


On  this day  of ,  1911,  before  me, . 

a  Notary  Pubhe  in  and  for  the  county  of resid- 
ing therein,  duly  commissioned  and  sworn,  personally  appeared 


Organization  of  an  Association  55 

known  to  me  to  be  the  persons  whose  names  are  subscribed  to 
the  within  instrument,  and  they  acknowledged  to  me  that  they 
executed  the  same. 

In  witness  whereof,  I  have 
hereunto  set  my  hand  and  aflftxed  my 
official  seal  the  day  and  year  in 
this  certificate  last  above  written. 


THE   BY-LAWS 


Notary  Public  in  and  for  said 
Coimty,  California. 


After  the  charter  is  secured  the  cooperators  are  ready 
to  organize  and  arrange  the  method  of  transacting  their 
operations.  The  incorporators,  stockholders,  or  members 
meet  and  adopt  a  set  of  regulations  for  the  conduct  of  the 
business.  The  by-laws  must  be  consistent  with  the  state 
and  federal  constitutions  and  statutes  and  with  the  pro- 
visions of  the  charter  itself. 

The  following  by-laws  include  most  of  the  provisions 
generally  set  forth  in  such  regulations  for  a  citrus  fruit 
organization.  They  are  adapted  to  the  non-profit  citrus 
fruit  marketing  organization  in  California.  They  con- 
tain a  contract  similar  in  scope  to  the  general  crop  agree- 
ment already  cited. 

BY-LAWS  OF  THE 
ASSOCIATION 


We,  the  undersigned  members  of  the 


Association,   constituting  a  majority  of  aU  the  members  and 

having  more  than  a  majority  of  all  the  votes  of  said  Association, 

do  hereby  adopt  the  following  new  by-laws  of  said  corporation : 

1.   A  certificate  of  membership  shall  be  issued  to  each  member, 


56  Cooperation  in  Agriculture 

who  thereunder  shall  have  as  many  votes  at  all  meetings  as  he 
has  bearing  acres  of  citrus  orchards  from  which  the  fruit  is  being 
marketed  through  this  Association.  The  number  of  such  acres 
shall  be  fixed  by  the  Board  of  Directors  from  time  to  time  as  may 
be  necessary  or  proper  and  indorsed  upon  the  margin  of  the  mem- 
bership certificate  respectively  and  a  record  thereof  kept  in  the 
books  of  the  corporation.  Each  member  will  pay  an  initial  fee  of 
One  DoUar  for  each  of  such  bearing  acres,  and  will  further  from 
time  to  time  contribute  his  pro  rata  share  of  all  sums  required  for 
packing  operations,  to  be  paid  either  in  cash  or  by  deductions 
from  fruit  sales  as  the  Directors  may  determine,  but  all  voting 
power  of  any  member  shall  cease  when  he  parts  with  the  control 
of  the  orchard  for  which  such  certificate  was  issued. 

2.  Such  certificates  of  membership  shall  not  be  assignable, 
and  the  assignment  thereof  shall  not  transfer  to  the  assignee 
any  voting  power,  property  right,  or  interest  in  this  corporation 
except  when  transferred  in  connection  with  the  bona  fide  sale 
and  to  the  purchaser  of  the  orchard  for  which  it  was  issued. 

3.  Any  member  of  this  corporation  may  be  expelled  by  mem- 
bers representing  two-thirds  of  all  the  votes  of  the  corporation 
for  any  reason  which  may  to  them  seem  sufficient  at  any  general 
or  special  meeting,  providing  the  interest  of  such  member  in  the 
assets  of  the  corporation  be  appraised  by  the  Board  of  Directors 
and  tendered  in  gold  coin  to  such  member  within  sixty  days, 
conditioned  only  upon  the  retiu-n  and  cancellation  of  his  certifi- 
cate of  membership  —  and  up)on  such  expulsion  all  right  of  such 
member  in  said  corporation  ceases. 

4.  This  corp)oration  will  be  affiliated  with  the 

in  the  marketing  of  its  frmt,  and  will  avail  itself  of  the 

marketing  facilities  of  the and  participate  in  its  manage- 
ment through  such  representatives  as  may  from  time  to  time 
be  authorized. 

5.  All  deductions  which  have  heretofore  been  made  or  which 
may  be  hereafter  made  from  sales  of  fruit  to  meet  subscriptions 
to  the  stock  of  the or  other  corporation  fur- 
nishing packing-house  or  orchard  supplies  for  the  membership, 
shall  be  treated  as  a  packing  charge  ratably  on  all  boxes  of  fruit 


Organization  of  an  Association  67 

packed  during  the  year  such  subscriptions  were  or  will  be  re- 
spectively paid.  The  debit  balance  of  such  stock  investment 
shall  be  inventoried  each  year  as  packing-house  supplies,  and  all 
principal  or  interest  repaid  shall  be  ratably  credited  to  the  boxes 
packed  each  year  as  repaid  respectively. 

6.  The  Board  of  Directors  may  fix  the  boundaries  of  the 
territory  tributary  to  the  packing-house  of  this  Association  from 
which  fruit  will  be  received. and  packed,  but  after  a  member  has 
been  accepted  no  change  shall  be  made  in  boundaries  which  will 
exclude  him  without  his  consent  until  his  property  right  and 
interest  in  the  corporation  has  been  appraised  by  the  Board  of 
Directors  and  the  value  thereof  so  found  paid  to  him  in  gold  coin 
on  surrender  of  his  membership  certificate. 

Annual  Meetings 

7.  The  annual  meeting  of  this  corporation  shall  be  held  at  the 
packing-house  on  the  second  Saturday  in  September  of  each  year 
at  the  hoiir  of  9  o'clock  a.m.  The  Secretary  shall  mail  to  each 
member  a  notice  of  said  meeting  at  least  two  weeks  prior  to  the 
date  thereof. 

The  President  of  the  Board  of  Directors  shall  preside  at  the 
annual  meeting  of  members ;  in  case  of  his  absence  the  Vice 
President  shall  preside,  and  in  case  of  the  absence  of  both,  the 
members  shall  select  a  Chairman  to  preside  for  the  time  being. 

At  this  meeting  Directors  shall  be  elected,  who  shall  serve 
for  one  year,  or  until  their  successors  shall  be  elected  and  quali- 
fied ;  and  such  other  business  shall  be  transacted  as  may  prop- 
erly come  before  the  meeting.  In  the  election  of  Directors, 
or  the  transaction  of  any  other  business,  each  member  shall  have 
as  many  votes  as  he  has  acres  of  bearing  orchards  marketed 
through  this  Association. 

Proxies  may  be  voted  by  any  member  or  representative  of  a 
member,  authorized  in  writing  to  do  so,  such  authority  having 
first  been  filed  with  the  Secretary. 

Special  meetings  of  the  members  may  be  called  by  the  Board 
of  Directors  at  any  time  by  mailing  notices  to  each  member  at 


68  Cooperation  in  Agriculture 

least  one  week  previously  thereto,  and  one-third  of  the  resident 
members  shall  constitute  a  quorum  to  do  business  at  any  meeting 
of  members. 

At  any  such  meeting,  by  a  majority  of  all  votes,  the  office  of 
any  Director  or  Directors  may  be  declared  vacant,  and  the 
meeting  may  at  once  proceed  to  elect  Directors  to  fill  such  va- 
cancies. 

Directors'  Meetings 

8.  The  Directors  shall  hold  a  meeting  immediately  after  the 
adjournment  of  the  annual  meeting,  or  not  later  than  one  week 
thereafter  and  organize  by  electing  one  of  their  number  President 
and  one  Vice  President.  They  shall  also  elect  a  Secretary  and 
Manager,  and  designate  such  bank  or  banks  to  act  as  Treasuries 
as  they  may  see  fit. 

The  Directors  shaU  hold  regular  meetings  on  the  last  Tuesday 
in  each  month,  at  the  hour  of  1.30  p.m.  at  the  packing-house. 

Special  meetings  of  the  Board  of  Directors  may  be  called  by 
the  President  at  any  time,  at  least  one  day's  notice  thereof  being 
given  by  verbal  or  written  notification. 

Duties  op  Directors 

9.  The  Board  of  Directors  shall  have  general  management  of 
the  afifarrs  of  the  Corporation,  authorize  aU  exx>enditures,  make 
all  contrsujts,  and  constitute  the  governing  power  of  the  Corpora- 
tion in  aU  matters  of  business.  They  shall  elect  a  foreman,  and 
such  other  employees  as  they  deem  necessary  to  the  proi)er 
canying  on  of  the  business  of  the  Corporation,  shall  Qx  their 
salaries,  and  define  their  duties. 

The  Board  of  Directors  shall  enter  into  such  business  relations 
with  the Fruit  Exchange  or  other  organiza- 
tion forming  a  part  of  the ,  for  the  marketing  of 

fruit  and  such  other  matters  as  they  deem  necessary  to  best  pro- 
mote the  interests  of  this  Corporation,  and  may  adopt  such  rules 
and  regulations  with  reference  to  the  officers  and  members  of 
this  Corporation  in  the  handling  and  marketing  of  their  fruit  as 


Organization  of  an  Association  69 

they  shall  deem  best  to  promote  the  objects  for  which  this  Cor- 
poration is  created. 

Nothing  in  this  article  shall  be  so  taken  or  construed  as  to 
authorize  any  other  organization  to  incur  any  debt  or  obligation 
on  behalf  of  or  which  shall  be  binding  on  this  Corporation,  with- 
out the  full  consent  of  the  Board  of  Directors  of  this  Corporation. 

In  case  of  damage  from  any  cause  to  any  crop,  the  Directors 
may  exclude  such  orchard,  in  whole  or  in  part,  from  participat- 
ing in  the  benefits  of  this  Corporation.  In  which  event  the 
grower  may  market  such  rejected  fruit  to  the  best  advantage, 
either  through  this  Corporation  on  his  separate  account  or  other- 
wise. 

Books  and  Accounts 

10.  The  Directors  shall  cause  proper  books  to  be  kept,  show- 
ing the  amount  of  fruit  delivered  by  each  member,  and  the  va- 
riety and  grade  thereof.  The  books  and  correspondence  of  the 
Corporation  shall  be  in  the  name  of  the  Corporation,  and  each 
member  shall  have  access  to  said  books  and  correspondence  on 
any  business  day  dm^ng  ordinary  business  hours.  A  suitable 
office  shall  be  maintained  at  the  packing-house,  which  shall  be 
the  office  and  headquarters  of  the  Corporation. 

Membership 

11.  Any  bona  fide  grower  of  citrus  fruits  properly  tributary  to 
the  packing-house  of  this  Association,  who  shall  sign  the  contract 
hereto  appended,  may  become  a  member  of  this  Corporation  by 
contributing  his  pro  rata  share  of  the  operating  investment  in 
accordance  with  the  Articles  of  Incorporation. 

All  growers  signing  said  by-laws  and  contract  thereby  become 
members  of  this  Corporation  for  the  entire  period  for  which  it 
is  incorporated,  subject  to  the  privilege  of  withdrawal  as  provided 
for  in  Article  VII. 

No  new  members  shall  be  received  into  the  corporation  after 
the  fifteenth  day  of  November,  during  the  disposal  of  the  present 
crop  of  each  year,  except  in  the  case  of  new  purchasers  of  groves, 
who  may  become  members  with  the  consent  of  the  Directors. 


60  Cooperation  in  Agriculture 


Duties  op  Members 

12.  It  shall  be  the  duty  of  all  members  of  this  Corporation, 
and  they  hereby  agree,  to  sell  and  market  their  citrus  fruit 
through  the  agency  of  or  by  means  provided  and  directed  or  by 
the  agency  or  agents  selected  and  employed  by  this  Corporation 
only,  and  no  member  shaU  be  at  liberty  to  seU,  market,  or  consign 
his  citrus  fruits  through  or  by  any  other  agency  than  such  as  are 
directed  and  provided  or  selected  and  employed  by  this  cor- 
poration. 

In  case  any  member  of  this  Corporation  does  otherwise  sell, 
market,  or  consign  his  said  citrus  fruits,  his  voting  power  and 
interest  in  this  Association  is  forfeited,  and  he  shall  immediately 
pay  to  the  Treasurer  of  this  Corporation  the  sum  of  Twenty-five 
(25)  cents  for  each  and  every  packed  box  of  commercial  weight 
so  sold,  marketed,  or  consigned  dming  the  remainder  of  such 
fiscal  year  as  liquidated  damages ;  it  being  impracticable  and 
extremely  difficult  to  fix  the  actual  damages  suffered  by  this 
Corporation.  In  default  of  such  payment,  the  same  may  be 
recovered  by  action  in  any  com"t  having  jurisdiction,  in  the  name 
of  this  Corporation  as  plaintiff. 

Every  member  selling  or  shipping  fruit  through  or  by  means 
established  or  authorized  by  this  corporation,  shall  pay  such  equal 
brokerage  per  box  as  may  be  found  necessary  to  create  such  a 
revenue  as  will  defray  all  expenses  necessarily  incurred  in  the 
conduct  of  the  business  of  the  Corporation. 

It  shall  be  the  duty  of  aU  members  to  see  that  their  fruit  is 
picked  and  handled  in  as  careful  a  manner  as  possible,  and  all 
fruit  shall  be  delivered  to  the  packing-house  on  conveyances  with 
easy  springs.  Any  fruit  handled  in  a  careless  manner  or  con- 
trary to  the  above  rule  shall  be  subject  to  rejection. 

And  when  by  a  majority  of  votes  the  members  have  adopted 
cooperative  picking  of  fruit,  each  member  shall  have  his  fruit 
picked  by  the  Association  at  such  times  and  in  such  quantities 
or  proportion  as  the  Board  of  Directors  may  direct. 


PLATE  IV.  —  Orange  Packing-house  and  Equipment.    Chapters  IV,  VIII. 


Orange  Packing-hocse.    Redlands,  California. 


OKA.vui:,  Ukading-table  and  :Sizing-m.\chine. 


Organization  of  an  Association  61 


Withdrawals 

13.  Any  member  may  withdraw  his  citrus  fruit  for  any  year  by 
filing  a  notice  in  writing  with  the  Secretary  of  this  Corporation 
during  the  first  fourteen  days  in  September  in  any  year,  stating 
that  he  withdraws  his  citrus  fruits  from  the  control  of  the  Cor- 
poration for  the  next  ensuing  year. 

The  Secretary  shall  present  this  notice  within  ten  days  from 
the  receipt  thereof  to  the  President,  who  shall  immediately  sign 
and  deliver  a  release  to  the  applicant  for  such  withdrawal ;  and 
the  record  of  said  withdrawal  shall  be  made  in  the  books  of  the 
Corporation.  No  member  shall  be  permitted  to  withdraw  who 
shall  be  indebted  in  any  manner  to  this  Corporation,  or  have  its 
property  in  its  possession,  until  such  indebtedness  shall  have 
been  fully  paid,  or  such  property  restored  to  the  Corporation. 

Grading  and  Making  Payments 

14.  Picking  orders  shaU  be  given  out  pro  rata  as  nearly  as 
possible.  Each  variety  of  fruit  shall  be  graded  according  to 
quality,  and  each  member  shall  receive  credit  for  the  number  of 
pounds  delivered  of  each  variety  and  grade  that  may  be  estab- 
lished, and  receive  pay  for  the  same  on  the  basis  of  what  aU 
fruit  of  similar  grade  has  been  sold  for,  in  the  particular  pool 
in  which  his  fruit  was  delivered,  less  expenses.  The  net  proceeds 
of  sales  shall  be  distributed  pro  rata  from  time  to  time  as  fast  as 
the  returns  become  available. 

Funds 

15.  The  funds  of  the  corporation  shall  be  deposited  upon 
their  receipt  by  the  Secretary  with  the  bank  or  banks  designated 
as  Treasuries,  and  shall  only  be  paid  out  on  warrants  signed  by 
the  President  or  Vice  President  and  the  Secretary. 

Brands 

le.  A  brand  or  brands  shall  be  established  which  shall  be 
placed  on  the  end  of  each  box  of  fruit.     AU  boxes  shall  have 


62  Cooperation  in  Agriculture 

marked  thereon  the  name  and  grade  of  the  fruit  therein.  The 
brands  together  with  the  books  and  correspondence  shall  be  the 
proi)erty  of  the  Corporation. 

Pools 

17.  The  Board  of  Directors  shall  have  authority  to  determine 
into  what  p>ools  deliveries  of  fruit  shall  be  divided,  both  of  oranges 
and  lemons.  Members  may  express  their  preference  in  the 
annual  meeting,  and  the  Directors  will  be  guided  thereby,  but 
may  change  same  when  in  their  judgment  it  becomes  advisable 
for  the  best  interests  of  the  Corporation. 

Lemons 

18.  Members  having  facilities  for  curing  lemons  and  who  in 
the  judgment  of  the  packing  foreman  are  properly  curing  the 
same  may  have  the  option  of  delivering  the  same  in  any  month 
irrespective  of  the  time  of  picking;  provided,  however,  that 
should  there  be  a  demand  for  lemons  beyond  the  supply  in  the 
curing  house,  the  manager  may  call  on  each  member  so  holding 
fruit  for  his  pro  rata  share  to  supply  such  demand. 

19.  Members  holding  lemons  shall  be  required  to  furnish  the 
manager  at  the  end  of  each  month  a  statement  showing  the  num- 
ber of  boxes  picked  during  said  month. 

Lemon  Pools 

20.  The  Board  of  Directors  shall  be  given  the  option  of  making 
monthly  or  semimonthly  lemon  pools,  each  pool  constituting  a 
transaction  by  itself ;  but  in  all  cases  before  the  same  comes 
into  effect,  the  members  shall  be  notified  one  week  in  advance. 

21.  No  fruit  shall  be  marketed  by  this  Corporation  that  does 
not  come  through  the  ordinary  channels  of  membership,  and 

no  member  shall  be  allowed  to  purchase  fruit  outside  of . 

and  market  it  through  this  Corporation. 

22.  The  expense  of  curing,  packing,  and  marketing  lemons 
shall  be  kept  separate  and  distinct  from  all  other  citrus  fruits. 


Organization  of  an  Association  63 

23.  These  By-laws  may  be  amended  or  altered  by  a  vote  of 
two-thirds  of  all  votes  at  the  annual  meeting,  or  at  any  special 
meeting  called  for  that  purpose. 

24.  Nothing  contained  in  these  By-laws  shall  be  construed  to 
interfere  with  bona  fide  sales  of  orchard  property,  together  with 
the  fruit  thereon,  and  any  purchaser  of  such  property  may  at 
his  option,  upon  signing  the  by-laws  and  contract  and  either 
purchasing  the  certificate  of  the  former  owner  or  contributing 
his  pro  rata  share  of  the  operating  investment,  have  the  same 
membership  rights  as  the  original  member. 

25.  On  all  questions  as  to  the  interpretation  of  these  By-laws, 
the  decision  of  the  Directors  shall  be  final,  unless  rescinded  at  a 
general  meeting  of  the  Corporation. 

26.  All  By-laws  other  than  the  foregoing  are  hereby  repealed. 

Contract 

We,  the  undersigned,  growers  of  citrus  fruits,  being  desirous 
of  having  om*  fruit  handled  in  a  manner  substantially  as  set  forth 
in  the  above  by-laws,  do,  for  such  pxuT)ose,  hereby  severally 

constitute    and    appoint    the ,  California,    a 

Corporation  organized  under  the  laws  of  the  State  of  California, 
om"  sole  agent  to  pack  and  sell  aU  citrus  fruits  which  may  be 
grown  on  our  respective  orchards,  dm-ing  the  entire  period  of 
membership  in  said  corporation.  We  and  each  of  us  do  further 
agree  that  all  expenses  incurred  by  said  Corporation  in  handling 
and  marketing  said  fruits  shall  be  paid  out  of  the  proceeds  of 
the  sale  of  said  frxiit  "pro  rata,  according  to  the  amount  of  fruit 
furnished  by  each  of  us  respectively,  and  we  and  each  of  us  agree 
to  accept  for  the  crop  our  pro  rata  share  of  the  net  proceeds  of  the 
sale  of  fruit  furnished  by  us,  after  deducting  the  cost  of  packing, 
selling,  and  other  necessary  expenses.  Nothing  herein  contained 
shall  be  construed  to  interfere  with  bona  fide  sales  of  orchard 
property.  Any  and  each  of  us  who  will  otherwise  dispose  of  the 
merchantable  fruit  grown  on  the  property  hereby  contracted, 
during  the  period  of  this  contract,  shall  pay  to  the  Corporation 
the  sum  of  Twenty-five  (25)  cents  for  each  and  every  packed  box 


64  Cooperation  in  Agriculture 

of  commercial  weight  so  sold,  marketed,  or  consigned,  as  liqui- 
dated damages,  as  provided  in  the  foregoing  By-laws,  which  are 
hereby  made  a  part  of  this  contract. 


THE   FEDERATION    OF    COOPERATIVE   ASSOCIATIONS 

The  business  of  a  cooperative  association  can  be  carried 
on  more  economically  and  effectively  when  a  number  of 
them  federate  into  a  cooperative  union  which  represents 
them  in  handling  the  problems  that  are  common  to  them 
all.  From  the  business  standpoint,  the  advantage  that 
the  capitalist  derives  from  the  centralization  of  large 
amounts  of  capital  into  corporations  can  be  obtained  by 
the  producer  by  the  federation  of  cooperative  associations 
in  a  central  democratic  organization.  The  federation 
can  develop  a  comprehensive  marketing  system;  it  can 
reduce  the  cost  of  production,  of  preparing  the  products 
for  shipment,  and  the  distribution  and  sale  of  the  products. 
Such  a  cooperative  imion  should  be  democratic  in  prin- 
ciple and  not  autocratic.  It  should  represent  centralized 
cooperation.  It  handles  the  questions  that  affect  the 
local  associations  as  their  representative  or  agent,  and  it 
can  perform  this  function  more  economically  and  eflB- 
ciently  because  the  expense  of  comprehensive  manage- 
ment is  prohibitive  in  a  small  association.  Like  the  large 
corporation,  a  central  cooperative  union  representing  a 
number  of  associations  has  a  larger  influence  than  a  small 
group  of  farmers  working  alone  in  dealing  with  trans- 
portation, legislative,  and  other  public  policy  questions, 
in  the  purchase  of  supplies,  the  distribution  and  sale  of 
products,  in  the  development  of  markets,  and  in  prevent- 


Organization  of  an  Association  65 

ing  the  enormous  wastes  of  fierce  and  unrestrained  com- 
petition. 

The  principle  of  federation  may  be  carried  as  far  as 
the  problems  of  an  industry  warrant.  The  farmers  of  a 
locality  can  group  themselves  into  local  organizations, 
these  in  turn  can  federate  into  district  associations  which 
handle  the  common  problems  of  the  local  organizations, 
and  the  district  associations  in  turn  may  federate  into 
larger  central  cooperative  unions  which  represent  the  dis- 
trict associations  in  handling  the  larger  questions  and  the 
marketing  policies  for  the  entire  industry.  This  system 
of  cooperative  federations  is  already  in  operation  in  the 
citrus  industry  in  California,  and  it  is  the  common  method 
abroad  of  handling  the  cooperative  credit  systems,  the 
associations  for  the  distribution  and  sale  of  farm  products, 
and  other  cooperative  enterprises. 

Necessity  of  a  Federation  of  Associations  for  Handling 
Farm  Products 

'  A  federation  of  associations  is  especially  needed  to 
handle  the  distribution  and  marketing  of  farm  crops  and 
to  protect  the  producer  in  the  purchase  of  supplies. 
There  is  a  tendency  among  those  who  handle  the  common 
necessities  of  life  to  organize  in  such  a  manner  as  to  re- 
strict competition,  to  regulate  the  sale  of  produce,  and 
the  price  paid  to  producers,  and  to  control  the  prices  that 
the  consumers  have  to  pay.  It  has  been  shown  by  an 
investigation  of  the  Attorney-general  of  New  York  State  ^ 

^  Report  of  the  Attorney-general  in  the  Matter  of  Milk  Investigation, 
Senate  Document  No.  45,  1910. 
F 


66  Cooperation  in  Agriculture 

that  the  control  of  the  milk  supply  of  New  York  City  is 
in  the  hands  of  a  few  large  corporations  and  associations 
of  milk  dealers,  that  the  price  which  the  New  York  State 
dairyman  receives  for  the  milk  does  not  often  exceed  the 
cost  of  production  and  sometimes  falls  below  the  produc- 
tion cost,  and  that  the  price  which  the  consumer  pays  for 
bottled  milk  and  milk  in  other  forms  has  been  generally 
and  arbitrarily  raised  at  different  times  in  the  past.  It 
has  been  shown  also  that  the  large  dealers  in  milk  have 
used  coercive  methods  to  prevent  independent  dealers  or 
any  other  agency  that  might  improve  the  condition  of 
the  dairyman  from  establishing  a  milk  trade  in  the  city 
of  New  York.  The  wheat  and  corn  growers  of  the  Central 
West  faced  a  similar  condition  a  few  years  ago  as  a  result 
of  the  arbitrary  action  of  the  line  elevators  and  independent 
elevator  companies  who  coerced  the  railroads  and  the  re- 
ceivers of  grain  to  the  extent  of  making  it  impossible  for 
an  individual  grower  to  market  the  crop  except  under 
conditions  which  they  dictated.  The  individual  producer 
of  beef  or  pork  is  in  the  same  condition  as  a  result  of  the 
meat  industry  having  passed  into  the  hands  of  a  few  large 
corporations  which  are  in  position  to  dictate  the  price  of 
live-stock.  An  individual  grower  cannot  cope  with  a 
situation  of  this  kind. 

A  small  association  can  adopt  rules  of  grading  and  can 
standardize  and  economize  in  preparing  the  product  for 
market,  but  it  cannot  develop  a  comprehensive  system 
either  to  meet  competition  or  to  develop  markets,  nor 
can  it  handle  the  general  problems  that  affect  an  industry 
in  a  larger  way,  though  it  can  manage  these  questions 
more   effectively   than   the   individual   who   acts   alone. 


Organization  of  an  Association  67 

When  several  associations  have  been  formed  to  handle  the 
product  of  an  industry,  like  potatoes,  apples,  milk,  butter, 
poultry,  citrus  fruits,  or  cotton,  the  associations  in  each 
special  line  can  organize  a  marketing  agency  to  provide 
the  marketing  facihties  for  them  all.  This  agency  can 
develop  markets  for  the  associations  by  advertising  or 
in  other  ways ;  can  furnish  daily  information  on  the  condi- 
tions of  the  markets  to  all  of  the  associations ;  it  can  take 
the  necessary  steps  to  meet  unfair  business  competition 
and  act  as  an  agent  in  securing  supplies,  in  handling  the 
transportation,  legal,  and  other  general  qu^tions  that 
affect  all  of  the  associations  alike. 

Cooperative  Organization  of  the  Federation 

The  central  federation  should  be  organized  on  coopera- 
tive principles,  and  the  dominant  feature  in  its  manage- 
ment should  be  cooperation  and  not  centralization.  The 
membership  of  the  federation  is  composed  of  the  associa- 
tions, and  each  is  represented  on  its  board  of  directors. 
Each  association  preserves  its  own  freedom  and  individual- 
ity but  they  join  together  under  a  legal  form  to  promote 
the  business  interests  of  the  industry.  The  federation 
may  be  formed  on  a  non-stock  basis  or  with  limited  capital 
stock  and  with  the  fundamental  cooperative  principles 
as  set  forth  in  the  preceding  pages  included.  No  divi- 
dends greater  than  the  customary  rate  of  interest  should 
be  paid  on  the  stock.  The  federation  should  perform  its 
functions  for  the  associations  at  cost.  The  money  needed 
for  operating  expenses  should  be  raised  by  assessing  a 
fixed  amount  per  unit  of  material  sold,  or  by  an  arbitrary 
retention  of  a  fixed  percentage  on  the  gross  sales.     The 


68  Cooperation  in  Agriculture 

surplus  earnings  at  the  end  of  the  season  are  prorated 
proportionally  to  the  associations,  or  deficits  are  met  by 
proportional  assessments. 

Necessity  of  Preserving  the  Individuality  of  the  Associa- 
tions 

While  there  must  be  a  complete  unity  of  management, 
it  is  fundamental  that  a  central  federation  shall  be  formed 
so  as  not  to  destroy  the  initiative  and  individuality  of  each 
locality  or  of  different  groups  of  farmers  who  may  be  asso- 
ciated for  a  common  purpose  in  the  same  locality.  It 
may  permit  a  large  individual  producer  to  market  his 
produce  through  it,  the  central  agency  handling  the  prod- 
uce of  the  individual  grower  on  the  same  basis  as  it  handles 
the  produce  of  the  associations.  In  this  way,  a  large 
grower  who  would  otherwise  dispose  of  his  crops  as  an 
individual  will  often  become  identified  with  the  coopera- 
tive movement.  He  will  reap  its  benefits  and  will  give 
to  it  his  experience  and  advice.  The  central  agency  should 
not  attempt  to  consolidate  or  amalgamate  the  growers  of 
the  different  associations  into  one  central  body,  nor  should 
it  dictate  or  control  the  policies  of  the  local  organizations. 
The  local  organizations  must  be  preserved  with  a  large 
amount  of  freedom  and  individuality.  To  amalgamate 
farmers  into  one  large  central  organization  will  kill  local 
pride  and  ambition.  It  is  fundamentally  wrong  in  prin- 
ciple. On  the  other  hand,  it  is  sound  public  policy  to 
preserve  the  local  associations  by  federating  those  that 
are  formed  for  the  same  special  purpose  into  a  cooperative 
central  agency  through  which  their  respective  businesses 


Organization  of  an  Association  69 

may  be  carried  on  more  economically,  while  yet  retaining 
their  local  freedom  and  individuality. 

The  central  organization,  however,  should  cooperate 
with  the  district  and  with  the  local  associations  in  build- 
ing up  the  cooperative  spirit  among  the  members.  It 
should  assist  in  the  organization  of  new  associations  or 
district  divisions  by  helping  secure  the  charter,  constitu- 
tion, and  by-laws  and  in  such  other  matters  as  tend  to 
perfect  the  organization.  It  should  cooperate  with  the 
local  associations  in  establishing  the  most  approved 
methods  of  management,  of  accounting  and  other  details 
of  operation.  It  should  be  given  authority  by  the  di- 
rectors to  place  experts  in  the  field  to  help  in  the  standardi- 
zation of  the  handling,  grading,  and  preparation  of  farm 
products  for  market,  so  that  there  may  be  established 
standard  grades  that  have  a  definite  meaning  with  the 
trade,  and  it  should  have  the  authority  to  advise  and 
assist  the  local  associations  in  every  way  that  builds  up 
the  cooperative  movement. 

It  has  been  found  in  European  countries  that  the 
cooperation  of  central  organizations  with  the  local  asso- 
ciations has  been  a  leading  factor  in  the  successful  es- 
tablishment of  the  cooperative  method  of  conducting 
business.  The  experts  sent  out  by  the  central  body  be- 
come a  strong  educational  factor  among  the  cow-testing, 
cattle-breeding,  butter-making,  egg-shipping,  and  crop- 
distributing  associations.  It  is  the  only  practical  method 
of  standardizing  the  grading  and  preparation  of  the  farm 
products  for  market,  because  the  local  associations  when 
left  to  themselves  vary  widely  in  the  efficiency  of  manage- 
ment and  cannot  attain  that  uniformity  in  their  products 


70  Cooperation  in  Agriculture 

that  is  essential  if  the  central  agency  is  to  develop  the 
most  reliable  and  comprehensive  marketing  plan. 

The  Organization  of  a  Federation 

In  some  of  the  states,  central  agencies  have  been  formed 
under  the  laws  which  permit  the  consolidation  of  corpora- 
tions formed  for  pecmiiary  profit.  The  laws  of  most  of 
the  states  do  not  provide  for  the  consolidation  of  coopera- 
tive associations  into  central  federations  which  operate 
on  cooperative  principles.  The  right  to  form  these  cen- 
tral agencies  should  be  incorporated  in  the  laws  of  every 
state.  If  the  organization  is  formed  to  bring  about  the 
advantages  of  the  cooperative  plan,  it  may  operate  with 
a  reasonable  degree  of  satisfaction  even  under  the  form 
of  a  stock  corporation  for  profit.  Usually,  however, 
these  central  agencies  are  formed  as  stock  corporations 
for  pecuniary  profit,  and,  like  any  other  corporation  of 
this  type,  the  stockholders  are  primarily  interested  in 
dividends  rather  than  in  the  general  welfare  of  the  farmer. 
To  illustrate,  an  organization  has  recently  been  formed 
to  act  as  an  agent  for  individuals  and  for  associations  in 
selling  fruit  and  vegetables.  Prominent  fruit-growers 
have  become  directors,  imder  the  supposition  that  it  is 
formed  as  a  cooperative  organization.  In  reality,  it  is 
a  stock  corporation  formed  among  the  fruit-growers  by 
men  whose  object  is  to  make  money  by  handling  the 
growers'  products.  The  majority  of  the  stock  is  held  by 
the  officers  who  organized  it  and  who  were  former  fruit- 
dealers.  The  voting  power  of  the  stockholders  is  pro- 
portional to  the  amount  of  stock  held.  Therefore,  the 
promoters  control  it.     Dividends  are  declared  and  paid 


Organization  of  an  Association  71 

out  of  the  surplus  profits  as  often  and  at  such  times  as 
the  board  of  directors  may  determine.  It  sells  and  dis- 
tributes the  fruit  at  a  cost  of  5  per  cent  on  the  gross 
sales.  It  has  no  contract  with  the  growers,  and,  like  many 
others,  it  is  a  loosely  formed  organization  promoted  by 
dealers  who  are  interested,  not  in  fruit-growing,  but  in 
stock  dividends,  surrounded  by  a  glamour  of  cooperation, 
operating  primarily  for  pecimiary  profit  and  under  the 
absolute  control  of  the  exploiters  who  organized  it. 

It  is  not  to  be  inferred  from  these  statements  that  all 
of  the  corporations  formed  to  handle  farm  products  for 
pecuniary  profit  have  been  without  benefit  to  the  producer. 
In  many  sections  the  farmers  are  not  ready  for  the  co- 
operative method  of  conducting  their  business.  Under 
these  conditions,  a  corporation  for  profit  controlled  by 
the  producers  may  be  formed  and  may  bring  to  the  farmer 
a  larger  return  for  his  crops  than  he  would  have  gained 
had  he  attempted  to  market  them  alone.  In  some  in- 
stances, these  corporations  have  successfully  marketed 
the  crops  of  a  community  and  at  the  same  time  have  paid 
dividends  on  the  capital  stock  of  20,  30,  and  even  50 
per  cent  to  the  grower-stockholder,  the  dividends  aris- 
ing from  profits  made  on  supplies  sold  to  the  members 
and  from  the  surplus  above  operating  expenses  when  the 
corporation  operated  on  a  fixed  percentage  of  the  gross 
sales. 

On  the  other  hand,  many  corporations  have  been  formed 
by  the  trade  to  distribute  and  market  farm  products  for 
the  producer.  In  some,  the  stock  is  owned  jointly  by  the 
trade  and  by  the  producers  as  individuals  or  by  associations 
of  producers.       These  latter  organizations  are  usually 


72  Cooperation  in  Agriculture 

organized  and  managed  by  the  trade,  and  the  producers 
are  included  as  a  means  of  giving  them  better  standing 
among  the  farmers.  These  organizations  may  help  a 
local  situation  temporarily,  but  they  can  have  but  one 
ending,  either  the  producers  or  the  trade  will  eventually 
gain  control  and  operate  the  corporation  for  their  special 
benefit.  It  is  an  impossible  condition  for  the  trade  and 
the  producers  to  manage  a  marketing  corporation  jointly. 
Their  interests  are  antagonistic,  and  the  final  outcome  is 
a  divorce  of  the  two  interests  or  the  absorption  of  one  by 
the  other.  A  striking  example  of  this  kind  was  an  at- 
tempt made  by  the  citrus  fruit-growers'  organizations  and 
the  speculative  shippers  of  California  a  few  years  ago  to 
form  an  agency  through  which  all  of  their  products  should 
be  distributed  and  sold.  The  plan  was  ambitious,  the 
agency  was  formed,  and  at  the  end  of  a  year  and  a  half  it 
was  dissolved  because  it  was  fundamentally  unsound  to 
attempt  to  amalgamate  these  antagonistic  interests  in 
one  general  organization.  Similar  efforts  are  being  made 
at  the  present  time  in  other  industries,  and  they  will  con- 
tinue to  be  promoted  in  the  future  by  either  the  producers 
or  by  members  of  the  trade  who  are  unable  to  handle  a 
marketing  situation  alone;  such  efforts  will  not  solve 
the  business  problems  of  rural  life,  their  ultimate  effect 
is  likely  to  retard  the  cooperative  movement  and  the 
development  of  an  industry.  We  desire  to  convey  in 
these  remarks  the  fact  that  these  growers'  and  shippers' 
organizations  formed  for  pecuniary  profit  are  not  organized 
on  the  cooperative  plan.  Their  aim  is  to  handle  the  dis- 
tributing business  a  little  more  economically  and  efficiently 
than  the  individual  can  do  alone  and  earn  enough  to  make 


Organization  of  an  Association  73 

a  profit  on  the  capital  invested.  The  degree  of  success 
depends  on  the  character  of  the  men  who  organize  and 
manage  them.  If  the  stockholders  are  composed  largely 
of  growers,  the  organization  is  likely  to  be  conducted  with 
some  of  the  cooperative  features  included,  but  if  it  is  com- 
posed of  fruit-dealers  and  shippers  who  have  little  interest 
in  the  production  of  crops,  then,  like  any  other  corpora- 
tion, the  primary  object  is  to  handle  the  farmers'  business 
in  such  a  way  as  to  bring  to  the  capital  invested  the  larg- 
est possible  return.  Under  these  conditions,  the  coopera- 
tive organizations  may  be  systematically  exploited  by  those 
who  represent  them  in  the  marketing  of  their  products. 

The  cooperative  method  of  conducting  business  is 
growing  rapidly  in  favor  in  the  United  States.  It  is  dis- 
cussed widely  by  educators,  legislators,  and  by  the  public 
press.  Already  there  are  many  signs  that  the  stock  cor- 
porations promoters  are  laying  plans  and  are  at  work  to 
induce  the  farmers  to  organize  so  that  their  business  may 
be  handled  more  effectively  by  those  who  are  interested 
in  their  formation.  These  movements  need  to  be  scanned 
carefully  before  the  producer  identifies  himself  with  them. 
If  they  are  formed  as  money-making  projects  for  the  pro- 
moters, they  will  not  help  the  American  farmer  reorganize 
his  business  operations  in  a  way  that  will  promote  the 
solution  of  the  rural  economic  problem. 

Cooperative  Associations  and  Public  Policy  Questions 

One  of  the  grave  dangers  that  confronts  a  cooperative 
organization  is  the  temptation  to  take  part  in  partisan 
political  questions.  There  are  many  enthusiastic  farmers 
who  try  to  commit  their  organizations  to  candidates  for 


74  Cooperation  in  Agriculture 

oflBce,  or  to  one  phase  or  another  of  a  controversial  ques- 
tion. There  are  also  many  skillful  politicians  who  en- 
deavor to  secure  the  support  of  the  farmers'  organiza- 
tions in  the  interest  of  either  measures  or  men,  and,  in 
the  heat  of  a  political  campaign  the  members  of  an  organi- 
zation, who  as  individuals  are  interested  in  practical 
poUtics,  often  use  every  effort  to  secure  the  indorsement 
of  the  association  of  the  measures  or  men  in  which  they 
are  interested. 

An  organization  formed  by  the  farmers  for  industrial 
purposes  should  not  indorse  candidates  for  office  or  take 
part  in  a  movement  that  is  primarily  political.  There 
may  be  public  policy  questions  of  an  economic  nature, 
such  as  the  tariff,  railroad  rate  legislation,  and  other  legis- 
lative questions  that  affect  the  welfare  of  the  industry, 
on  which  it  may  be  advisable  for  an  organization  to  express 
its  judgment  or  to  take  an  active  part  in  the  shaping  of 
the  public  policy  affecting  it.  But  even  on  these  ques- 
tions, a  farmers'  organization  formed  for  industrial  pur- 
poses should  be  slow  to  act  and  should  only  express  it- 
self when  a  vital  issue  is  involved. 

There  are  members  in  every  farmers'  organization  of 
widely  different  shades  of  political  conviction.  It  is  a 
common  practice  of  the  opponents  of  the  cooperative 
method  to  endeavor  to  have  an  association  commit  itself 
on  a  political  question  or  to  indorse  a  candidate  for  office 
in  order  to  create  dissension  among  the  members.  Any 
such  action  on  the  part  of  an  association  is  sure  to  create 
dissension  and  in  the  end  to  disrupt  an  organization. 

A  cooperative  organization  that  is  formed  to  distribute 
farm  products  or  to  purchase  supplies  or  for  any  other 


Organization  of  an  Association  76 

special  purpose  should  confine  its  efforts  in  that  direction. 
A  distributing  organization,  for  example,  cannot  handle 
the  public  policy  questions  that  affect  the  industry  outside 
of  the  marketing  problems  without  more  or  less  friction 
with  other  similar  organizations.  There  is  usually  a 
strong  rivalry  among  these  associations,  and  it  is  difficult 
to  secure  the  cooperation  of  all  of  the  organizations  in  an 
industry  in  handling  a  general  question  which  affects 
them  all  alike.  If  an  attempt  is  made  to  handle  a  pubfic 
poHcy  question  through  any  one  of  the  existing  distrib- 
uting organizations,  an  agricultural  industry  is  almost 
sure  to  fail  in  an  effort  to  meet  and  solve  the  transporta- 
tion questions,  the  state  and  national  legislative  questions 
and  other  public  poUcy  matters  that  affect  it. 

The  Citrus  Protective  League  of  California 

The  California  citrus  industry  has  formed  a  volun- 
tary organization  known  as  the  Citrus  Protective  League 
to  handle  the  public  policy  questions  that  affect  the  in- 
dustry as  a  whole.  A  brief  discussion  of  this  League 
will  indicate  the  opportunity  for  organization  along  these 
lines.  The  League  represents  about  90  per  cent  of  the 
shippers  and  shipping  organizations  in  all  parts  of  the 
state  in  handling  such  questions  as  railroad  rates  and 
transportation  problems,  customs  tariffs  and  other  gov- 
ernmental relations,  state  and  federal  legislation  that 
applies  directly  to  the  citrus  business,  and  all  other  ques- 
tions of  a  general  nature  that  affect  the  upbuilding  of  the 
industry,  except  the  marketing  of  the  fruit. 

The  citrus  industry  of  California  represents  $150,- 
000,000  to  $200,000,000  capital  invested.     Ten  to  fifteen 


76  Cooperation  in  Agriculture 

thousand  growers  cultivate  the  fruit,  100,000  people 
depend  on  it  for  a  living,  and  from  15,000,000  to  20,000,000 
boxes  valued  at  20  to  35  million  dollars  are  shipped  annu- 
ally from  the  state.  The  industry  is  very  highly  spe- 
cialized. None  other  in  agriculture  is  held  together  by 
larger  common  interests  or  is  brought  in  closer  contact 
with  organized  business  on  every  hand  and  has  larger 
public  policy  questions  confronting  it. 

The  League  makes  it  possible  for  all  of  the  shippers  and 
growers  to  stand  together  in  handling  the  general  questions 
that  affect  the  industry  and  through  which  they  may 
cooperate  in  the  general  upbuilding  of  the  industry. 
It  avoids  all  questions  that  lie  within  the  province  of  the 
established  marketing  agencies.  It  keeps  away  from 
political  questions.  It  vigorously  defends  the  growers 
and  shippers  whenever  their  interests  are  jeopardized  by 
legislation,  by  unjust  railroad  rates,  or  by  other  public 
policy  relations.  It  develops  a  constructive  policy  for 
the  improvement  of  the  cultural  practices  of  the  growers 
and  of  the  fruit-handling  methods  of  the  shipper  and  then 
secures  the  cooperation  of  the  state  and  federal  agencies 
best  adapted  to  the  investigation  and  upbuilding  of  these 
lines.  The  League  is  a  unique  organization  among  the 
agricultural  industries  of  America.  It  is  applying  the 
methods  that  have  contributed  so  much  to  modem  in- 
dustrial progress  to  the  problems  of  the  orange  and  lemon 
grower.  It  is  a  voluntary  organization  formed  by  grow- 
ers, shippers,  and  shipping  organizations.  It  is  sup- 
ported by  funds  raised  by  general  assessment  based  on 
the  number  of  cars  of  fruit  shipped  by  each  member  dur- 
ing tUa  preceding  year. 


Organization  of  an  Association  77 

The  work  of  the  League  has  had  a  far-reaching  effect 
on  the  mdustry.  It  has  brought  about  reductions  in  the 
freight  and  refrigeration  rates  on  citrus  fruits  that  have 
saved  the  producers  milHons  of  dollars,  the  reduction  of 
10  cents  per  hundred  pounds  in  the  orange  rate  in  1907 
adding  more  than  four  million  dollars  to  the  income  of 
the  growers  in  the  five  years  following.  It  secured  through 
Congress  an  equalization  of  the  tariff  duty  between  oranges 
and  lemons  by  securing  an  increase  in  the  duty  on  lemons 
equal  to  the  difference  in  the  cost  of  producing  the  lemons 
as  compared  with  the  oranges,  the  duty  on  lemons  now 
being  1|  cents  per  pound  and  on  oranges  1  cent  per 
pound.  It  brought  about  a  change  in  the  federal  regu- 
lations regarding  the  determination  of  decay  in  imported 
fruit  which  has  protected  the  California  industry  against 
unfair  competition,  and  it  has  secured  the  cooperation 
of  the  state  and  federal  governments  in  the  investigation 
of  the  nutrition  troubles  in  citrus  groves,  in  the  study  of 
citrus  by-products,  and  in  other  questions  that  affect  the 
upbuilding  of  the  industry. 


CHAPTER  V 
FINANCING  A    COOPERATIVE   ORGANIZATION 

The  financing  of  a  farmers'  cooperative  organization 
may  be  handled  in  several  ways.  The  most  common 
methods  of  raising  money  to  establish  a  non-profit  asso- 
ciation are  the  assessment  of  members,  membership  dues, 
and  a  contribution  by  each  member  in  the  proportion 
that  his  acreage  or  product  bears  to  the  total  acreage 
or  product  handled  through  the  association.  After  the 
charter  is  secured  and  the  organization  is  formed,  the  usual 
method  of  securing  money  to  erect  buildings  or  to  supply 
the  equipment  needed  is  to  give  a  corporation  note  to  a 
bank  as  security  for  a  loan,  and  then  to  repay  the  bank 
with  money  raised  in  any  of  the  ways  already  noted.  If 
the  organization  is  incorporated  as  a  stock  corporation 
for  profit,  the  funds  may  be  raised  by  the  sale  of  stock, 
by  adopting  the  method  described  above,  or  by  a  combina- 
tion of  both  methods. 

CITRUS-FRUIT  ORGANIZATIONS 

The  citrus-fruit  marketing  associations  in  California, 
though  desiring  to  operate  on  the  cooperative  plan,  were 
nearly  all  formed  under  the  stock  corporation  laws,  be- 
fore the  non-profit  agricultural  association  law  was  enacted. 
A  brief  review  of  their  methods  will  be  suggestive. 

78 


Financing  a  Cooperative  Organization  79 

These  associations  each  required  a  packing-house  and 
equipment  costing  from  $10,000  to  $40,000  in  which  to 
prepare  the  fruit  for  shipment.  They  were  usually  organ- 
ized with  a  capital  stock  varying  from  $10,000  to  $50,000. 
The  stock  was  issued  in  shares  of  $1  to  $5  each,  and  was 
sold  to  citrus-growers  only.  Each  grower  could  buy  stock 
at  the  rate  of  one  or  more  shares  per  acre,  depending 
on  the  rule  laid  down  by  the  directors.  In  other  asso- 
ciations, the  number  of  shares  an  individual  could  hold 
was  often  limited  in  amount.  The  land  on  which  the 
packing-house  was  built  was  purchased  or  was  sometimes 
leased  from  the  railroad  alongside  of  which  the  house 
was  erected.  The  paid-in  stock  furnished  part  of  the 
money  with  which  to  supply  the  facilities.  In  addition, 
the  corporation  secured  funds  from  a  bank  by  giving  a 
corporation  note  as  security  and  repaid  the  bank  through 
a  period  of  years  by  withholding  certain  percentages 
from  the  sale  of  fruit.  These  organizations,  though  stock 
associations,  were  not  organized  for  pecuniary  profit, 
and  no  dividends  are  paid  on  the  stock.  When  the 
association  is  formed  as  a  non-profit  corporation,  the 
money  needed  to  build  and  equip  the  packing-house  is 
secured  on  a  corporation  note  and  repaid  by  withholding 
a  certain  percentage  of  the  proceeds  of  the  sale  of  fruit, 
or  by  assessing  each  package  sold,  a  definite  amount. 

ANNUAL   FINANCING 

In  either  the  stock  or  non-stock  corporation,  the  money 
needed  to  pay  the  operating  expenses  during  the  first 
few  weeks  of  the  season,  including  the  purchase  of  supplies 
and  the  payment  of  labor,  is  usually  secured  from  the  banks 


80  Cooperation  in  Agriculture 

on  corporation  notes  and  is  repaid  from  the  proceeds  of 
the  first  shipments  of  fruit.  Sometimes  it  is  taken  from 
a  reserve  fund  accumulated  for  this  purpose.  The  money 
needed  by  the  cooperative  organization  or  by  stock  cor- 
porations to  cover  operating  expenses  throughout  the 
season  is  usually  proyided  by  retaining  a  certain  percent- 
age of  the  gross  amount  realized  for  the  produce,  or  a 
fixed  assessment  per  package  or  per  weight  or  other  unit 
of  measure  may  be  fixed  and  retained  by  the  association. 
In  the  fruit-distributing  organizations,  the  amount  re- 
tained varies  from  5  to  10  per  cent  of  the  gross  sales. 
If  the  sale  takes  place  on  the  owner's  farm,  the  amount 
retained  by  the  association  may  be  smaller.  If  the  oper- 
ating expenses  are  provided  by  retaining  a  fixed  amount 
per  package,  per  hundredweight,  per  bushel,  or  other  unit, 
the  amount  to  be  retained  is  arbitrarily  fixed  by  the  direc- 
tors from  time  to  time.  After  paying  out  the  operating 
costs  including  rent,  insurance,  brokerage,  reserve,  and 
other  expenses,  the  surplus  earnings  are  paid  as  stock 
dividends  in  a  stock  corporation,  or  are  prorated  to  the 
fruit  of  each  member  in  proportion  to  the  fruit  shipped  in 
a  cooperative  organization.  In  some  of  the  associations 
that  have  been  incorporated  as  corporations  for  profit,  a 
certain  proportion  of  the  surplus  is  first  paid  as  dividends 
to  the  stock,  and  the  remainder  is  prorated  to  the  members 
in  proportion  to  the  business  transacted.  This  latter 
system  is  followed  in  many  organizations  which  have  been 
obliged  to  organize  as  stock  corporations  for  pecuniary 
profit  but  which  desire  to  operate  on  the  cooperative  plan. 
Some  of  the  stock  organizations  make  a  profit  on  the 
supplies  furnished  the  members,  on  the  money  loaned  to 


Financing  a  Cooperative  Organization  81 

the  members,  and  on  other  financial  transactions,  and 
in  this  way  increase  the  stock  dividends,  the  reserve  ac- 
count, and  the  amount  prorated  to  the  members. 


DIFFICULTIES   IN   FINANCING 

In  a  section  where  the  cooperative  plan  is  not  an  es- 
tablished method  of  conducting  business,  it  is  sometimes 
difficult  to  finance  a  new  cooperative  organization.  Ex- 
cept in  a  few  sections,  the  cooperative  method  is  new  to 
the  banker.  The  organizations  are  often  formed  by  irre- 
sponsible or  inexperienced  farmers  who  do  not  inspire 
business  confidence,  and  who  are  not  entitled  to  liberal 
credit  consideration.  They  are  often  attacked  by  their 
competitors,  who  may  influence  the  banks  in  which  they 
are  interested  not  to  extend  credit.  Under  these  condi- 
tions, the  banks  naturally  pursue  a  conservative  course, 
corporation  notes  are  not  always  acceptable  as  security 
for  loans,  and  the  responsible  directors  of  the  associations 
may  be  required  to  give  personal  notes  as  additional 
security.  As  soon  as  the  cooperative  plan  is  successfully 
established,  the  banks  and  other  business  institutions  rec- 
ognize that  the  method  adds  stability  to  agricultural 
credit.  The  personal  notes  of  the  directors  are  then  no 
longer  required  for  security,  and  the  corporation  note 
takes  its  own  place  as  the  most  common  form  of  associa- 
tion credit  security.  Another  serious  credit  difficulty 
that  the  cooperative  association  often  meets  is  the  in- 
ability of  the  banks  to  loan  more  than  a  certain  proportion 
of  their  capital  stock  to  any  one  corporation.  In  Colorado, 
where  the  limit  is  10  per  cent,  the  associations  often  have 


82  Cooperation  in  Agriculture 

difficulty  in  securing  enough  credit  at  the  beginning  of 
the  season  to  properly  transact  their  business. 

One  of  the  most  serious  difficulties  that  the  farmers' 
cooperative  association  has  to  overcome  is  to  fix  a  method 
of  raising  money  to  provide  buildings  and  equipment  that 
is  fair  and  equitable  to  all  of  the  members.  For  example, 
a  packing-house  with  equipment  may  cost  $20,000.  If 
the  money  needed  to  pay  for  the  investment  is  raised  by 
retaining  a  percentage  from  the  sale  of  produce,  the  grower 
who  has  a  poor  orchard,  who  cultivates  poorly,  whose 
trees  are  young  or  whose  yields  for  any  other  reason  are 
light,  contributes  proportionally  less  to  the  investment 
than  the  grower  whose  yield  of  fruit  is  heavy.  After  the 
house  and  equipment  are  paid  for,  the  young  orchards  or 
light-bearing  orchards  may  increase  in  productiveness. 
The  owner  then  secures  the  benefits  of  the  permanent 
facilities  out  of  proportion  to  his  contribution  for  their 
provision.  If  the  basis  of  assessment  is  the  acreage  of 
each  member,  the  grower  whose  orchards  have  recently 
come  into  bearing  or  are  in  light  bearing  pays  propor- 
tionally more  for  the  permanent  investment  than  the 
man  whose  trees  yield  heavily  and  who  ha^  a  greater 
use  of  the  packing-house.  If  the  money  is  raised  by  the 
sale  of  stock,  the  difficulties  in  relation  to  the  control  of 
the  membership  already  described  are  encountered. 
These  difficulties,  while  sometimes  serious,  are  not  grave 
enough  to  prevent  the  successful  financing  of  associations 
by  farmers  who  are  convinced  of  the  value  of  the  coopera- 
tive method  of  conducting  business. 


Financing  a  Cooperative  Organization  83 

THE   PAYMENT   OF   DIVIDENDS 

There  are  several  methods  used  m  the  distribution  of 
surplus  earnings  in  farmers'  organizations.  In  the  asso- 
ciations that  have  been  formed  as  stock  corporations 
under  the  ordinary  corporation  law  for  pecuniary  profit, 
the  earnings  may  be  apportioned  entirely  to  the  stock; 
or,  if  the  corporation  desires  to  operate  for  the  benefit 
of  the  members,  it  may  pay  a  fixed  dividend  to  the  stock- 
holders, set  aside  a  reserve  fund,  and  a  fund  to  cover 
depreciation,  and  then  distribute  the  balance  of  the  sur- 
plus to  the  members  in  proportion  to  their  shipments  or 
dealings  with  the  corporation;  or,  the  corporation  may 
decide  to  pay  no  dividends  on  the  stock,  and  distribute 
the  entire  surplus  in  proportion  to  the  dealings  of  each 
member  with  the  association.  When  the  association  is 
a  non-profit  corporation,  the  operations  are  conducted 
at  cost,  and  the  entire  surplus,  after  a  reserve  fund  is 
set  aside,  is  prorated  to  the  members  in  proportion  to 
their  dealings  with  the  association. 

The  payment  of  high  dividends  on  the  capital  stock 
has  caused  the  downfall  of  many  farmers'  organizations 
that  are  formed  as  stock  corporations,  though  they  may 
conduct  many  of  their  operations  on  cooperative  principles. 
These  organizations  are  not  cooperative,  though  they  may 
include  some  cooperative  features.  They  are  stock  com- 
panies organized  and  managed  by  farmers.  The  stock- 
holders retain  a  proportion  of  the  surplus  earnings  for 
money-making  purposes  or  to  compensate  them  for  the 
risk  of  investing  their  capital  just  as  is  done  in  any  other 
stock   corporation.     In  some   of   the   farmers'  elevator 


84  Cooperation  in  Agriculture 

companies,  the  stockholders  are  sometimes  paid  a  dividend 
of  100  per  cent.  In  some  of  the  fruit-distributing  organi- 
zations, the  stockholders  have  been  paid  dividends  of 
10,  20,  30,  or  even  50  per  cent  on  the  capital  stock.  In 
others  which  combine  some  of  the  cooperative  features, 
they  pay  to  the  non-stockholders  who  ship  through  the 
organization  one-half  or  one-third  as  much,  more  or  less, 
as  the  stock  dividends ;  or  the  distribution  of  the  surplus 
earnings  may  be  made  in  other  ways. 

In  one  fruit-distributing  organization  that  is  formed  as 
a  stock  corporation,  but  which  shares  some  of  the  earn- 
ings with  the  non-stockholders  and  operates  partly  on 
the  cooperative  plan,  the  shipper  is  charged  7  per  cent 
on  the  gross  proceeds  for  operating  expenses.  It  is  pro- 
vided that  the  capital  stock  shall  be  paid  a  6  per  cent 
dividend,  that  a  reserve  fund  shall  be  accumulated,  and  if 
a  further  amount  is  available  for  distribution,  it  shall  be 
divided  as  follows :  "75  per  cent  amongst  all  growers  or 
growers'  organizations  who  have  signed  contracts  and 
shipped  consistently  with  this  exchange  during  the  sea- 
son when  this  dividend  has  been  earned,  based  propor- 
tionally on  the  gross  amount  realized  by  the  fruit  of  such 
shippers ;  and  25  per  cent  to  be  a  further  dividend  on 
paid-up  stock."  It  is  also  provided  that  no  stockholder 
shall  hold  more  than  ten  shares  of  stock,  or  a  total  of  one 
thousand  dollars.  This  organization  has  been  one  of  the 
most  successful  of  the  stock  corporations  which  operate 
partly  on  cooperative  principles. 

The  trouble  that  arises  over  the  payment  of  dividends 
is  usually  with  the  members  who  hold  a  small  amount 
of  stock,  and  with  those  who  utilize  the  marketing  facili- 


Financing  a  Cooperative  Organization  85 

ties  as  contract  shippers,  but  who  are  not  stockholders 
in  the  organization.  These  shippers  are  likely  to  become 
dissatisfied  when  they  learn  that  a  large  surplus  earning 
has  been  accumulated  above  the  cost  of  operation.  The 
payment  of  high  dividends  reduces  their  proceeds  and 
enriches  the  growers  who  have  money  invested  in  the 
organization  but  who  may  not  have  contributed  to  its 
success  except  in  the  original  investment.  Another 
danger  in  the  stock  corporation  is  that  the  farmers  be- 
come dissatisfied  after  receiving  liberal  dividends  on  their 
stock  when  business  conditions  are  such  that  a  dividend 
cannot  be  declared.  The  stock  corporation  that  has  had 
to  organize  for  pecuniary  profit  can  still  bring  to  its  mem- 
bers many  of  the  advantages  of  the  cooperative  plan  by 
refusing  to  pay  dividends  on  the  stock  as  most  of  the 
citrus-fruit  associations  do,  or  at  least  by  paying  a  stock 
dividend  not  in  excess  of  the  customary  rate  of  interest. 
Any  other  policy  unless  carefully  guarded  is  likely  to  be 
followed  by  a  loss  in  the  confidence  and  support  of  its 
members  and  by  the  ultimate  failure  of  the  association. 

A  farmers'  organization  that  has  been  chartered  under 
the  corporation  laws  for  pecuniary  profit  stands  on  a 
dangerous  foundation  because  the  temptation  is  always 
great  to  pay  large  dividends  on  the  stock  when  surplus 
earnings  have  been  accumulated.  An  organization  that 
is  formed  on  this  basis  imder  the  guise  of  the  cooperative 
plan  may  prove  a  menace  to  the  solution  of  the  agricultural 
problem.  If  it  operates  for  profit,  it  is  likely  to  discourage 
a  legitimate  cooperative  movement.  The  average  farmer 
has  not  sufficient  information  to  discriminate  between 
the  different  kinds  of  organizations,  and  he  is  apt  to  judge 


86  Cooperation  in  Agriculture 

all  cooperative  efforts  by  the  abuses  of  the  organizations 
that  are  not  formed  on  the  cooperative  plan.  An  organiza- 
tion that  is  formed  as  a  stock  corporation  primarily  for 
pecmiiary  profit  and  which  does  not  operate  to  some  ex- 
tent for  the  benefit  of  its  members  should  be  debarred 
by  the  statute  from  using  the  term  "cooperation"  or 
"cooperative"  in  connection  with  its  corporate  name. 
If,  as  a  stock  corporation,  it  is  successful  and  helps  the 
farmers  who  are  stockholders  or  the  contract  shippers 
solve  the  problems  of  distribution  and  sale,  it  deserves 
to  live,  but  it  should  not  be  allowed  to  secure  the  support 
of  farmers  under  the  supposition  that  it  is  an  organiza- 
tion formed  on  cooperative  principles.  The  cooperative 
method  of  transacting  business  is  radically  different  from 
the  usual  stock  corporate  method.  The  object  of  the 
former  is  not  primarily  to  declare  dividends.  It  is  formed 
to  build  up  and  improve  the  industry  through  the  appli- 
cation of  business  methods  which  are  carried  on  at  cost, 
the  earnings  all  going  to  the  producer.  The  basis  of  one 
is  capital,  and  a  leading  motive  is  the  dividends  which 
the  capital  earns;  the  cooperative  method  has  personal 
effort  joined  with  the  efforts  and  products  of  others,  all 
working  in  union  to  make  better  farming  possible  by  giving 
the  farmer  the  largest  possible  return  for  his  labor  and 
for  the  risk  he  takes  in  the  conduct  of  his  business. 


CHAPTER  VI 
BREEDERS'    AND   GROWERS'   ASSOCIATIONS 

The  cooperative  method  of  conducting  the  business 
side  of  agriculture  may  be  applied  in  a  greater  or  less 
degree  to  the  different  phases  of  production ;  to  the  manu- 
facture of  the  products  of  the  farm,  such  as  butter,  cheese, 
wine,  oil,  and  similar  products ;  to  the  handling,  sale,  and 
distribution  of  farm  products ;  to  the  purchase  of  supplies, 
such  as  fertilizers,  machinery,  spraying,  and  packing 
material ;  to  rural  credit ;  and  to  miscellaneous  services 
which  touch  the  farmer,  such  as  irrigation,  the  telephone, 
insurance,  and  electric  power.  This  division  of  the  efforts 
of  an  association  is  arbitrary  and  somewhat  artificial, 
because  any  one  of  these  functions  may  be  handled  singly, 
or  more  than  one  function,  like  production  and  sale  and 
the  purchase  of  supplies,  may  be  combined  in  one  asso- 
ciation. 

The  cooperative  method  has  reached  its  most  effective 
development  in  the  handling  and  marketing  of  farm  prod- 
ucts and  in  the  purchase  of  supplies.  These  efforts  affect 
the  farmers'  pocket  book;  they  influence  the  business 
methods  of  agriculture  visually,  while  the  benefits  that 
spring  from  other  lines  of  activity  can  often  be  seen  only 
through  their  indirect  effect  on  better  farming  or  better 
business  methods.  There  has  been  less  cooperative  effort 
in  crop  production  and  in  the  incidental  features  already 

87 


88  Cooperation  in  Agriculture 

mentioned  than  in  handling  and  marketing  and  in  the 
purchase  of  supplies. 

The  cooperative  method  may  be  applied  to  several 
phases  of  agricultural  production.  Its  most  practical 
application  lies  in  the  improvement  by  associated  rather 
than  individual  effort  of  crops  and  animals  and  in  the 
protection  of  crops  against  insect  pests,  fungous  diseases, 
and  injurious  temperatures.  It  may  also  be  applied  to 
some  of  the  details  of  crop  production  such  as  the  pruning 
of  trees,  the  irrigation  of  the  land,  to  the  fumigation  of 
trees,  or  other  cultural  features  which  may  be  handled 
for  the  individual  members  by  a  crop-marketing  or  sepa- 
rate organization.  All  of  these  problems  can  be  met  effec- 
tively by  progressive  farmers,  but  their  efficiency  in  an 
industry  can  reach  a  high  plane  only  when  a  group  of 
farmers  organize  to  apply  the  best-known  agricultural 
methods  to  an  industry  as  a  whole.  The  individual 
farmer,  for  example,  can  fumigate  or  spray  his  trees  for 
scale  insects,  and  if  all  of  the  growers  in  his  locality  prac- 
tice fumigation  voluntarily,  the  trees  of  a  community 
may  be  kept  free  of  the  pest.  But  there  will  be  the  widest 
variation  in  the  methods  of  fumigation,  and  this  will  re- 
duce the  average  efficiency  of  the  whole  operation.  On 
the  other  hand,  a  cooperative  organization  formed  by 
the  growers  of  a  commimity  to  handle  the  fumigation  or 
spraying  problem  collectively  brings  about  greater  econ- 
omy in  work  and  a  uniformity  in  the  application  of  methods 
which  is  rarely  realized  through  the  efforts  of  the  individual 
fruit-growers  or  by  contractors  who  fumigate  or  spray 
the  trees  for  the  growers.  Incidentally,  the  value  of  prop- 
erty increases  in  such  a  conmiunity,  because  the  orchard 


Breeders'  and  Growers'  Associations  89 

of  every  grower  is  more  productive,  more  attractive,  and 
more  profitable.  The  spirit  that  leads  the  people  to  meet 
these  rural  problems  collectively  rather  than  individually 
is  quickened  in  such  a  community  with  a  resulting  impetus 
to  every  movement  that  leads  to  a  better  country  life. 

In  order  to  set  forth  the  manner  in  which  the  coopera- 
tive method  may  be  applied  to  the  production  and  im- 
provement of  crops  and  animals,  a  discussion  of  a  few 
types  of  successful  cooperation  along  these  lines  will 
follow. 

COOPERATIVE    COW-TESTING   ASSOCIATIONS 

Every  progressive  dairyman  understands  that  there 
is  a  wide  variation  in  the  amount  of  milk  and  in  the  quan- 
tity of  butter-fat  produced  annually  by  the  different 
cows  in  the  herd.  He  can  reduce  the  question  to  an  exact 
basis  by  weighing  the  milk  regularly,  determining  the 
proportion  of  butter-fat  with  a  Babcock  tester,  and  by 
keeping  a  record  of  the  amount  of  food  consumed  by  each 
cow.  In  this  way,  he  can  eliminate  the  unprofitable 
cows,  and  increase  the  efficiency  of  his  herd.  This  is 
profitable  to  the  dairyman,  but  few  will  adopt  the  plan 
individually.  What  the  dairy  industry  needs  is  the  appli- 
cation of  the  methods  of  the  progressive  dairyman  to  all 
of  the  cows  of  a  community  so  that  the  entire  industry  can 
be  raised  to  the  level  of  the  most  successful  individual. 

The  Danish  Example 

The  practical  way  to  accomplish  this  end  was  shown 
by  a  little  group  of  dairymen  in  Vejen,  Denmark,  in  1895. 
These  dairymen,  twelve  in   number,    owned   300    cows. 


90  Cooperation  in  Agriculture 

They  associated  themselves  together  and  employed  a 
tester  whose  busmess  was  to  test  the  cows  of  each  member 
twice  a  month.  He  kept  a  record  of  the  milk,  determiaed 
the  butter-fat,  and  weighed  the  feed  consumed  by  each 
cow.  The  dairymen  thereby  knew  which  cows  returned 
a  profit,  which  barely  paid  expenses,  and  which  were 
supported  at  a  loss.  The  Danish  farmers  elimhiated  the 
unprofitable  cows,  bred  from  the  best,  developed  the 
cooperative  method  of  handling  the  dairy  industry  in 
other  ways,  and  by  adopting  the  cooperative  plan  as  a 
system  of  conducting  their  business  have  made  Denmark 
the  most  progressive  dairy  country  of  the  world.  Twenty- 
five  years  ago  the  Danish  cow  averaged  112  pounds  of 
butter-fat ;  now  her  annual  average  is  twice  that  amount, 
while  the  average  yield  of  milk  per  head,  including  heifers, 
is  often  750  to  800  gallons  per  cow.  In  1911  there  were 
530  of  these  cow-testing  associations  in  that  little  country, 
supported  mainly  by  the  farmers  and  receiving  in  addition 
a  grant  of  $30,000  to  S35,000  from  the  Danish  government 
for  their  advancement.  The  Danish  farmer  buys  feed 
in  the  United  States,  pays  transportation  charges  to  his 
country,  maintains  his  herd  on  high-priced  land,  and  com- 
petes successfully  with  the  American  dairyman  in  the 
English  market. 

All  of  the  leading  dairy  countries  of  Europe  have  adopted 
the  cooperative  cow-testing  plan,  and  the  movement  has 
recently  been  spreading  in  the  dairy  sections  of  the  United 
States,  especially  in  the  dairy  states  of  the  Central  West. 
In  1910,  there  were  more  than  200  of  these  associations 
in  Canada,  and  in  1911,  there  were  nearly  100  associations 
in  the  United  States. 


Breeders'  and  Growers'  Associations  91 

The  Plan  of  a  Cow-testing  Association 

The  plan  of  a  cow-testing  association  is  simple.  It  is 
usually  organized  around  a  creamery.  Each  association 
contains  13  to  26  members  owning  300  or  more  cows, 
the  former  number  if  each  herd  is  to  be  tested  twice  a 
month ;  the  latter,  if  once  a  month.  The  members  pay 
from  $1  to  SI, 50  annually  for  the  testing  of  each  cow. 
The  association  employs  a  tester  who  is  a  specialist  in  the 
dairy  industry  and  who  gives  the  dairymen  expert  ad- 
vice aside  from  the  testing  of  the  cows  and  pays  him  from 
$50  to  $100  a  month.  He  spends  a  day  with  each  herd, 
provided  it  does  not  contain  more  than  40  cows,  and  he 
may  test  more  than  one  herd  in  a  day  if  they  are  small 
and  not  too  distant  or  too  widely,  separated. 

The  official  tester  weighs  the  milk  once  a  month  or 
oftener,  night  and  morning,  determines  the  amount  of 
milk  and  butter-fat  produced  and  the  quantity  of  hay, 
roughage,  and  grain  consumed  by  each  cow.  He  deter- 
mines the  cost  of  keeping  the  cow  each  month  by  multiply- 
ing the  result  of  each  test  by  30.  At  the  end  of  the  year, 
the  farmer  knows  approximately  how  much  butter-fat 
each  cow  has  produced,  and  what  it  has  cost  to  produce 
it.  The  tester  leaves  a  record  of  the  herd  each  month 
with  the  dairyman,  showing  the  cost  of  feeding  and  the 
production  of  each  cow.  He  keeps  a  detailed  permanent 
record  in  the  test  book  of  the  association.  This  book  he 
takes  with  him.  It  is  open  to  the  inspection  of  every 
member  of  the  association. 

The  value  of  a  cow-testing  association  to  a  dairy  com- 
munity is   incalculable.     It   leads   to   more   economical 


92  Cooperation  in  Agriculture 

feeding,  better  herds,  and  better  general  management. 
It  is  the  only  practical  method  that  has  been  adopted  by 
which  the  herds  of  a  locality  can  be  systematically  im- 
proved. Purely  as  a  business  matter,  every  farmer  ought 
to  determine  whether  his  cows  are  profitable  or  not.  The 
method  of  cow-testing  has  been  advocated  among  the 
dairymen  for  years,  but  comparatively  few  individual 
farmers  have  adopted  it.  The  farmer  is  usually  too  busy 
to  make  a  systematic  test  of  his  herd,  and  unless  the  tests 
are  continuous  and  systematic,  they  are  worthless.  The 
cooperative  plan,  however,  is  thoroughly  practical.  It 
furnishes  a  striking  example  of  a  method  by  which  a 
great  industry  can  be  built  up  by  the  adoption  of  a  co- 
operative plan  where  the  individual  has  failed. 

The  next  step  in  the  cow-testing  association  is  the  pur- 
chase of  a  high-grade  bull  to  be  used  in  the  improvement 
of  the  herds  of  a  community.  The  tests  determine  the 
unprofitable  cows.  These  the  dairyman  eliminates.  It 
fixes  the  most  profitable  animals  in  the  herd.  These  the 
dairyman  breeds  to  high-grade  bulls  and  thereby  improves 
the  standard  of  the  cows  in  the  entire  community.  The 
plan  is  simple  and  practical.  Combined  with  the  co- 
operative creamery,  the  cow-testing  association  and  the 
cooperative  ownership  of  high-grade  bulls  form  a  nucleus 
through  which  the  cooperative  method  of  conducting 
business  can  be  applied  more  effectively  to  the  dairy 
industry  than  to  most  of  the  special  agricultural  industries 
of  the  United  States. 


Breeders'  and  Growers'  Associations  93 


Articles  of  Agreement  in  a  Cow-testing 
Association 

The  cow-testing  association  may  be  incorporated  on 
the  cooperative  plan,  or  it  can  be  handled  through  the 
mutual  agreement  of  its  members  without  legal  incorpora- 
tion. A  number  of  these  organizations  may  be  federated, 
as  in  Denmark,  and  the  whole  movement  handled  more 
systematically.  The  following  provisions  contain  the 
essential  features  of  a  cow-testing  membership  agree- 
ment. The  association  should  also  provide  the  customary 
by-laws  covering  the  officers  and  their  duties,  the  board 
of  directors,  membership,  dues,  amendments,  and  the 
time  and  place  of  holding  meetings. 

Whereas, Dairy    Testing  Association   has 

been  organized  for  the  principal  purpose  of  providing  means  for 
the  cooperation  of  its  members  in  weighing  and  testing  the  milk 
of  their  cows  periodically  and  for  the  improvement  of  their  dairy 
interests,  and  whereas,  it  is  proposed  by  said  company  to  engage 
a  smtable  person  for  that  pm-pose  as  soon  as  enough  subscriptions 
are  obtained  to  warrant  said  association  to  engage  such  person, 
we,  the  undersigned  members  of  said  association  each  for  himself 
and  not  one  for  the  other,  severally  agree  to  pay  the  sum  of  one 

dollar  ( minimum  charge)  a  year  for  each  cow  set 

opposite  our  respective  names  to  said  association  for  that  pur- 
pose. Said  fees  to  be  paid  in  quarterly  installments  in  advance, 
the  first  payment  to  be  made  as  soon  as  such  person  is  engaged 
by  said  association.  Each  one  of  us  also  agrees  to  furnish  board 
and  lodging  for  said  person  for  at  least  one  day  each  month  and 
convey  him  to  his  next  place  of  work.  Said  person  shall  not  work 
Simdays,  but  shall  have  board  and  lodging  over  Sunday  at  the 
place  where  he  is  working  Saturday. 


94  Cooperation  in  Agriculture 


THE   COOPERATIVE   BREEDING   OF  LIVE-STOCK 

The  cooperative  method  furnishes  a  practical  way  by 
which  high-grade  animals  and  the  different  breeds  of 
stock  of  a  commmiity  can  be  improved  and  developed. 
Little  systematic  effort  has  been  made  by  the  farmers 
of  the  United  States  to  improve  the  different  kinds  of 
live-stock.  Individual  breeders  have  built  up  high-grade 
herds  and  have  improved  different  breeds,  but  American 
farmers  as  a  whole  have  not  been  affected  by  these  efforts. 
To  be  productive  of  results,  animal-breeding  must  follow 
well-defined  lines.  The  breeders  must  understand  the 
fundamental  principles  of  animal  improvement,  and  then 
the  farmers  must  be  organized  before  community  breed- 
ing can  be  undertaken.  These  qualifications  or  the  abil- 
ity to  apply  these  principles  in  animal  breeding  are  not 
possessed  by  the  average  farmer.  Under  the  cooperative 
method,  a  systematic  breeding  plan  can  be  adopted,  the 
method  organized  and  systematized  under  a  common 
leadership,  herds  tested  and  weeded  out,  male  animals 
owned  collectively,  and  the  herds  and  breeds  of  a  com- 
munity improved  and  developed  with  the  same  degree 
of  efficiency  that  the  successful  individual  breeder  attains. 
The  cooperative  breeding  work  can  be  organized  around 
the  creamery  and  the  cow-testing  associations,  or,  when 
the  aim  is  to  develop  definite  qualities  in  animals,  such  as 
milk-producing  qualities  in  cows,  or  a  certain  conforma- 
tion or  ability  to  lay  on  flesh  for  meat-producing  purposes, 
the  movement  may  be  organized  independently. 


Breeders'  and  Growers'  Associations  95 

Cooperative  Cattle-breeding  in  Denmark 

The  cooperative  animal-breeding  plan  was  first  de- 
veloped in  Denmark,  when  in  1874,  a  cattle  breeders' 
association  was  formed  to  keep  pure  and  improve  the 
Jutland  breed  by  the  use  of  pure-bred  bulls.  Twenty 
years  ago  the  movement  spread  rapidly,  and  the  local 
associations  began  to  federate  in  order  to  have  the  work 
of  the  societies  done  according  to  a  uniform  plan,  and  to 
handle  more  efficiently  the  general  problems  that  affected 
all  alike.  Five  years  ago,  there  were  more  than  a  thousand 
of  these  cattle  breeders'  associations  in  Denmark,  owning 
1300  bulls  and  having  a  total  membership  of  26,000. 
The  membership  includes  the  smallest  farmers  and  peas- 
ants as  well  as  the  landed  proprietors. 

The  federated  associations  employ  an  expert  whose 
duty  it  is  to  advance  the  interests  of  the  cattle  breeders' 
associations  and  the  test  associations  by  attending  meet- 
ings and  fairs,  helping  the  associations  select  the  cows  and 
bulls  for  breeding  purposes,  helping  organize  associations, 
keeping  the  herd  books,  and  by  assisting  the  individual 
members  in  every  possible  way. 

The  membership  of  an  association  averages  about 
twenty-four.  One  or  more  bulls  are  purchased  by  the 
association  at  the  ratio  of  one  bull  to  fifty  to  seventy-five 
cows,  the  bulls  being  kept  by  the  different  members  who 
submit  the  most  favorable  bids.  The  cows  worthy  to 
be  bred  to  the  bull  are  selected  by  a  committee,  the  data 
on  which  the  selection  is  based  resulting  from  the  milk, 
butter,  and  cost-of-maintenance  tests  and  from  the  pre- 
vious breeding  of  the  animal. 


96  Cooperation  in  Agriculture 

The  money  required  to  purchase  the  bull  and  for  othei 
association  purposes  is  paid  in  by  the  members  in  propor- 
tion to  the  number  of  cows  each  has  registered  in  the  asso- 
ciation. The  annual  expenses  are  provided  by  membership 
fees,  service  fees,  the  premiums  at  fairs,  and  by  government 
aid,  the  latter  amounting  to  an  annual  average  of  about  $40 
for  each  association  bull  and  $67  for  each  cow-testing  asso- 
ciation that  conforms  to  certain  regulations  prescribed  by 
the  government  as  a  condition  to  receiving  state  aid.  In 
1909,  the  Danish  government  appropriated  $136,000  to 
assist  the  breeders'  and  cow-testing  associations. 

In  1909,  there  were  in  Denmark  270  horse-breeding 
societies  with  21,500  members,  1259  cattle-breeding  so- 
cieties with  31,300  members,  253  pig-breeding  societies 
with  6430  members,  and  102  sheep-breeding  societies 
with  850  members;  receiving  in  total  about  400,000 
crowns  from  the  state.  In  Germany  there  were  2000 
cooperative  dairy  societies  in  1908  with  a  quarter  of  a 
million  members,  and  a  large  number  in  Austria,  England, 
and  other  European  countries.  The  influence  of  the 
cattle  breeders'  associations  on  the  Danish  dairy  industry 
is  set  forth  by  Rasmussen  ^  as  follows  :  — 

"1.  By  organization  and  cooperation  it  became  pos- 
sible for  the  smaller  farmers  to  obtain  a  rapid  improve- 
ment in  their  herds,  which  otherwise  would  practically 
have  been  impossible  ; 

"2.  They  have  constantly  and  forcibly  demonstrated 
to  the  farmer  the  value  of  a  pure-bred  bull  of  recognized 
family  in  the  improvement  of  the  herd ; 

^  Bulletin  129,  Bureau  of  Animal  Industry,  U.  S.  Department  of  Agri-* 
culture,  Cattle  Breeders'  Associations  in  Denmark. 


Breeders^  and  Growers^  Associations  97 

"3.  The  herd  books  and  records  kept  by  the  associa- 
tion have  taught  the  farmer  to  appreciate  the  value  of  a 
pedigree  in  the  selection  of  breeding  animals ; 

"4.  By  cooperating  with  the  cow-test  associations  and 
agricultural  societies  it  has  become  possible  to  employ 
many  cattle  experts,  who  not  only  have  acted  as  educators 
and  advisers,  but  to  whom  is  due  the  credit  for  the  uni- 
form and  systematic  way  in  which  this  work  is  carried  on 
throughout  the  country. 

"The  important  part  played  by  the  breeders'  associa- 
tions in  the  improvement  of  cattle  is  quite  noticeable 
at  the  fairs  and  shows.  A  few  years  ago  the  greater  por- 
tion of  the  animals  exhibited,  especially  bulls,  belonged 
to  individual  farmers  owning  large  herds.  To-day,  not 
only  do  more  bulls  in  the  show  rings  belong  to  the  breeders' 
associations,  but  these  most  frequently  carry  off  the  high- 
est honors.  By  means  of  these  associations,  a  large  num- 
ber of  the  smaller  farmers  who  could  not  afford  to  keep  or 
buy  a  high-priced  bull  for  a  few  cows  have  had  an  equal 
opportunity  for  improving  their  herds,  as  well  as  equal 
chances  at  the  shows,  with  the  farmers  who  own  the  large 
herds.  Furthermore,  they  have  added  greatly  to  the 
interest  taken  in  the  shows  and  fairs,  as  each  member  of 
an  association  takes  a  personal  interest  and  pride  in  having 
his  association  bull  successfully  meet  the  often  very  keen 
competition." 

Cooperative  Cattle-breeding  in  the  United  States 

The  cooperative  breeding  method  is  beginning  to  be 
applied  to  a  limited  extent  to  the  improvement  of  breeds 
in  the  United  States,  especially  in  Wisconsin,  and  to  a 


98  Cooperation  in  Agriculture 

small  extent  in  other  dairy  states.  In  the  state  of  Maine, 
there  are  several  cooperative  breeders'  associations  formed 
around  the  pure  breeds  of  cattle  and  also  for  the  purpose  of 
developing  a  better  high-grade  dairy  stock. 

In  Wisconsin.  —  In  1910,  Humphrey  ^  gave  an  account 
of  thirty-one  community  associations  in  Wisconsin,  in- 
cluding more  than  one  thousand  breeders,  organized  to 
produce  and  improve  high-grade  and  pure-bred  dairy 
cattle  and  to  establish  a  reputation  for  a  community  as  a 
breeding  center.  The  first  organization  was  formed  in 
Wisconsin  in  1906,  when  a  dozen  young  men  formed  what 
is  now  known  as  the  Waukesha  Guernsey  Breeders' 
Association. 

It  is  the  object  of  each  association  to  produce  and  im- 
prove high-grade  and  pure-bred  cattle  of  the  breed  around 
which  they  are  organized.  The  cows  of  each  member 
are  bred  to  pure-bred  bulls  of  the  breed  represented  by 
his  association.  Each  member  is  to  care  for  his  herd  in 
the  most  approved  manner ;  he  must  cooperate  with  the 
members  in  the  purchase  and  use  of  the  pure-bred  bulls, 
in  the  sale  of  surplus  stock,  and  in  the  promotion  of  the 
dairy  interests  of  his  community.  These  associations 
keep  a  herd  register  in  which  the  animals  of  each  member 
are  entered.  They  adopt  methods  of  protecting  the 
members  against  fraud  and  against  the  spread  of  disease 
among  the  cattle,  such  as  contagious  abortion.  They 
adopt  cooperative  methods  of  insuring  the  bulls,  and  they 
seek  aid  from  the  state  and  federal  governments  in  the 

^  Bulletin  189,  Community  Breeders'  Associations  for  Dairy  Cattle 
Improvement,  the  University  of  Wisconsin,  Agricultural  Experiment 
Station. 


Breeders'  and  Growers'  Associations  99 

general  promotion  of  their  object.  These  organizations 
may  also  act  as  agents  for  the  members  in  buying  feed  and 
other  supplies.  They  may  assist  in  the  distribution  of 
farm  crops,  develop  markets  for  the  stock  and  products 
by  advertising,  and  develop  better  business  methods  for 
the  individual  in  a  variety  of  ways. 

It  has  been  the  experience  in  Wisconsin  that  an  asso- 
ciation should  not  be  too  large.  Rather  there  should 
be  an  association  for  each  breed  in  each  community,  or 
at  least  in  each  county.  The  formation  of  a  number  of 
associations  leads  to  a  healthy  rivalry  among  them  that 
is  a  distinct  advantage  to  the  dairy  industry.  These 
associations  may  be  federated  as  they  are  in  European 
countries. 

Cooperative  cattle-breeding  hy  the  federal  government^ 
the  state,  and  the  farmers  in  Minnesota.  —  In  Minnesota, 
the  cooperative  breeding  of  milking  shorthorns  was  un- 
dertaken in  1907  by  the  United  States  Department  of 
Agriculture  and  the  Minnesota  Experiment  Station  in 
cooperation  with  the  owners  of  ten  herds  of  shorthorn 
cattle.  The  aim  of  this  effort  is  outlined  by  Handschin  ^ 
as  follows :  — 

"  First,  the  reestablishing  of  profitable  milking  qualities 
in  the  shorthorn,  combined  with  the  conformation  and 
ability  to  lay  on  flesh  and  make  a  good  beef  carcass  when 
the  animal  is  sent  to  the  block. 

"Second,  the  working  out  of  a  practical  system  of 
cooperation  and  community  breeding  that  can  eventually 

* "  Cooperative  Breeding  of  Milking  Shorthorns  in  Minnesota,"  by 
W.  F.  Handschin,  of  the  American  Breeders'  Association,  Vol.  6,  p. 
301. 


100  Cooperation  in  Agriculture 

be  adapted  to  all  classes  of  live-stock  and  make  progress 
in  animal  breeding  more  rapid  and  sm-e  through  the  fol- 
lowing means :  —  - 

"By  reducing  the  cost,  where  the  herds  are  small  and 
conveniently  located,  by  using  sires  jointly  ; 

"By  making  the  most  of  the  comparatively  few  high- 
class  sires  that  are  produced  in  any  breeding  project  ; 

"By  conserving  the  proven  sires  and  using  them  as 
long  as  they  can  do  service,  changing  them  from  one  group 
to  another  to  prevent  unwise  close  breeding ; 

"By  creating  community  centers  in  certain  classes  or 
breeds  of  pedigreed  live-stock  and  attracting  buyers  to 
these  communities,  thus  insuring  better  markets  for  the 
animals  produced." 

The  Minnesota  plan,  which  may  also  be  applied  to  the 
different  kinds  of  animal-breeding,  is  of  interest  in  showing 
the  method  that  has  been  adopted  there  to  bring  about 
practical  cooperative  breeding  work.  The  United  States 
Department  of  Agriculture,  the  State  Experiment  Station, 
and  the  owners  of  the  herds  have  formed  an  organization 
known  as  a  circuit  council.  This  council  is  composed  of 
one  representative  from  each  of  these  organizations.  It 
has  charge  of  the  breeding  operations,  and  it  devises  means 
for  raising  fimds  to  purchase  sires  outside  of  the  organiza- 
tion. The  council  employs  a  specialist  who  visits  each 
herd  in  the  circuit  at  least  once  a  month  for  the  purpose 
of  testing  the  cows  for  milk  and  butter-fat,  to  assist  in 
the  selection  of  the  breeding  animals,  and  to  give  the  owner 
expert  advice  in  every  possible  way,  the  members  agree- 
ing to  follow  the  directions  of  the  expert  when  approved 
by  the  council.     The  Department    and  the  Experiment 


Breeders'  and  Growers'  Associations  101 

Station  defray  the  expenses  of  the  Circuit  Council,  and 
the  salary  and  expenses  of  the  expert.  They  also  secure 
information  as  to  where  suitable  breeding  animals  can  be 
found  and  advice  in  the  selection  of  the  animals.  They 
defray  the  cost  of  transportation  of  the  sires  that  are 
purchased,  and  the  cost  of  transferring  bulls  within  the 
circuit  in  order  that  the  exchange  of  desirable  sires  may 
be  encouraged.  They  also  furnish  the  apparatus  and  in- 
struments necessary  for  testing  the  cows  for  milk  produc- 
tion and  butter-fat.  The  owners  of  the  herds  agree  to 
provide  at  least  five  cows  from  families  having  good  milk- 
ing records,  and  to  purchase  one  or  more  bulls,  subject 
to  the  approval  of  the  council. 

The  plan  is  further  elaborated  by  Handschin,  who  says : — 

"  The  president  of  the  association,  together  with  a 
representative  of  the  United  States  Department  of  Agri- 
culture, and  a  representative  from  the  State  Experiment 
Station,  constitute  the  executive  council,  which  makes 
all  necessary  regulations  regarding  the  purchase,  sale, 
mating,  selection,  and  management  of  animals  on  the 
circuit. 

"The  executive  council  also  employs  a  circuit  superin- 
tendent who,  under  the  direction  of  the  council,  advises 
and  directs  the  general  management  of  the  herds,  keeps 
records  of  feed  consumed,  milk  produced,  and  breeding 
power  of  the  animals  in  the  circuit. 

"The  circuit  superintendent  spends  two  days  a  month 
with  each  cooperator.  During  this  time  he  weighs  the 
milk  produced  by  each  cow,  and  takes  a  composite  sample 
from  which  butter-fat  determinations  are  made.  From 
these,  and  the  record  of  daily  weights  kept  by  the  coopera- 


102  Cooperation  in  Agriculture 

tor,  the  annual  records  of  milk  and  butter-fat  production 
are  computed. 

"The  general  plan  of  operation  is  to  list  all  cows  of 
desirable  conformation  and  bred  along  milking  lines. 
Using  the  yearly  records  of  production  as  a  basis  of  selec- 
tion, all  cows  that  do  not  milk  profitably  are  discarded. 
All  cows  listed  are  bred  to  sires  owned  by  the  Experiment 
Station.  These  have  been  selected  from  herds  that  have 
been  systematically  bred  and  selected  for  a  combination 
of  profitable  dairy  production  and  a  desirable  conforma- 
tion from  the  beef  standpoint.  That  is,  they  are  the 
produce  of  dams  that  have  yearly  records  of  from  10,000 
to  18,000  pounds  of  milk  and  400  to  600  pounds  of  butter- 
fat,  and  combined  with  this  the  ability  to  lay  on  flesh 
when  dry  and  attain  weights  from  1400  to  1600  pounds 
when  in  good  flesh.  What  the  breeding  power  of  these 
sires  will  be,  cannot  be  foretold  at  present.  The  two 
crops  of  calves  on  the  circuit  are  a  promising-looking 
lot. 

"All  heifer  calves  from  approved  dams  are  raised  and 
will  be  tried  out  at  the  pail  when  they  come  into  milk. 
The  bull  calves  are  raised  to  8  to  10  months  of  age,  when 
they  will  be  divided  into  three  classes  :  reserved,  approved, 
and  rejected.  All  of  those  rejected  will  be  sold  for  slaughter, 
those  approved  will  be  sold  to  breeders  in  the  usual  way, 
and  those  reserved  will  be  kept  for  use  on  the  circuit. 
The  sires  reserved  for  the  circuit  may  be  offered  for  sale 
to  other  members  of  the  association,  used  to  supply  the 
new  herds  taken  into  the  circuit,  sold  to  outside  breeders 
with  options  to  repurchase,  or  'farmed'  out  to  approved 
breeders  until  needed  on  the  circuit.     In  this  way  all  of 


Breeders'  and  Growers'  Associations  103 

the  best  females  are  kept  on  the  circuit,  and  all  of  the 
good  sires  produced  are  kept  available  at  any  time  in 
case  their  individual  development  or  the  performance  of 
related  animals  warrant  using  them. 

"The  Experiment  Station  also  maintains  a  small  herd 
of  which  complete  records  have  been  kept  since  1907. 
Their  annual  production  has  ranged  from  6000  to  8400 
pounds  of  milk  and  200  to  320  pounds  of  butter-fat, 

"Two  years'  records  of  production  are  now  complete 
for  the  other  herds  on  the  circuit.  They  have  ranged 
from  4500  to  9000  pounds  of  milk  and  150  to  400  pounds 
of  butter-fat.  The  increased  yields  during  the  year  just 
closed  for  the  outside  herds  indicates  that  with  better 
management  the  average  production  for  the  whole  cir- 
cuit will  be  materially  increased. 

"Up  to  date  about  35  cows  which  are  considered  good 
enough  for  foundation  stock  have  been  selected.  Judg- 
ing from  performances  to  date,  they  should  make  from 
6,000  to  10,000  pounds  of  milk  and  200  to  400  pounds  of 
fat,  with  good  care. 

"Most  of  them  milk  persistently  for  9  to  10  months  or 
within  2  months  or  less  of  calving.  These  cows  range 
in  size  from  1200  to  1500  pounds  when  mature.  Some 
of  the  best  milkers  that  have  had  to  be  discarded  for  non- 
breeding  or  other  causes  have  sold  at  4  to  5  cents  per 
pound  and  brought  from  $60  to  $65." 

The  Rules  of  the  Circuit  CounciIi 

The  rules  of  the  circuit  council  are  as  follows  :  — 
"1.   Circuit  animals  shall  be  divided  into  three  classes,  as 
follows :  — 


104  Cooperation  in  Agriculture 

"  (o)  Certified  animals,  authorized  to  be  used  in  breeding  within 
the  circuit. 

"  (6)  Registered  animals,  not  entitled  to  use  in  breeding  within 
the  circuit,  but  recommended  for  registration  in  the  American 
Shorthorn  Herdbook. 

"  (c)  Disqualified  animals,  of  inferior  individuality  or  breeding 
and  not  worthy  of  use  for  breeding  puri)oses. 

"2.  All  animals  classified  as  certified  or  registered  animals 
shall  be  registered  by  breeders  in  the  American  Shorthorn  Herd- 
book  at  their  own  expense. 

"3.    Disqualified  animals  shall  be  sold  for  slaughter  only. 

"4.  Bulls  shall  be  purchased  by  the  individual  members  of  the 
Association  as  needed  and  subject  to  the  approval  of  the  circuit 
council.  Such  bulls  shall  be  retained  by  the  purchaser  only  as 
long  as  desired  for  use  on  cows  entered  in  the  Association,  and 
members  of  the  Association  shall  have  a  15-day  option  on  all 
such  buUs  at  not  to  exceed  the  original  purchase  price  before  sale 
can  be  made  outside  of  the  Association. 

"5.  No  bull  in  the  circuit  shall  be  used  on  cows  outside  the 
circuit. 

"6.   No  bull  shall  be  used  to  excess. 

"7.   No  service  fee  shall  be  charged  for  any  bull  in  the  circuit. 

"8.  No  animal  or  animals  shall  be  entered  or  used  in  the  cir- 
cuit which  have  reacted  to  the  tuberculin  test  made  by  a  compe- 
tent veterinarian. 

"9.  All  cattle  on  farms  whose  owners  desire  to  enter  the  As- 
sociation shall  be  tested  for  tuberculosis  by  a  competent  veter- 
inarian, and  no  one  shall  be  allowed  to  enter  the  Association  xintil 
such  test  shows  his  cattle  to  be  free  from  tuberciilosis. 

"10.  No  tuberculin  shall  be  injected  at  any  time  into  cattle 
in  the  circuit  or  covered  by  the  provisions  of  Rule  9,  except  by 
an  official  veterinarian  appointed  by  the  circuit  council. 

"11.  No  febrifuge  shall  be  administered  to  cattle  tested  for 
tuberculosis  under  these  rules  for  ten  days  before  or  ten  days 
after  such  test. 

"12.  The  circuit  council  will  drop  summarily  any  cooperator 
attempting  in  any  way  whatsoever  to  render  the  tuberculin  test 


Breeders'  and  Growers'  Associations  105 

ineffective,  by  injecting  tuberculin,  giving  febrifuges  or  by  other 
means. 

"13.  No  animal  shall  be  sold  outside  the  circuit  without  the 
consent  of  the  circuit  council. 

"14.  The  circuit  superintendent  (a)  shall  not  be  a  member  of 
the  circuit  council ;  (b)  he  shall  have  no  financial  interest  in 
Shorthorn  cattle ;  (c)  he  shall  have  full  charge  under  the  agree- 
ment between  the  Secretary  of  Agricultm-e,  the  Director  of  the 
Minnesota  Experiment  Station,  and  the  Cooperative  Circuit 
Association,  shall,  in  consultation  with  the  owners  of  the  animals, 
direct  all  matings  of  circuit  animals  and  the  rotation  of  bulls 
throughout  the  circuit ;  (d)  he  shall  keep  in  touch  with  the  work 
by  regular  and  frequent  visits  to  each  herd  in  the  circuit,  accord- 
ing to  instructions  of  the  council ;  (e)  all  his  books,  records,  and 
accounts  shall  be  open  to  the  inspection  of  the  council  and  the 
members  of  the  Association ;  (/)  he  may  employ  experts  with  the 
approval  of  the  council ;  (g)  his  headquarters  shall  be  at  the  Min- 
nesota Experiment  Station,  St.  Anthony  Park,  Minn. ;  (h)  he 
may  be  removed  at  any  time  by  a  unanimous  vote  of  the  circuit 
council. 

"15.  The  circuit  council,  by  a  unanimous  vote,  may  drop 
members  from  the  Association,  or  add  new  members  ;  such  action 
to  be  subsequently  ratified  by  three-fourths  of  the  members  of 
the  Association  present  at  any  regularly  called  or  annual  meeting. 

"These  rules  may  be  amended  by  an  unanimous  vote  of  the 
circuit  council,  subject  to  ratification  by  a  three-fourths  vote  of 
the  members  of  the  Association  present  at  any  meeting." 

Cooperative  Horse-breeding 

The  cooperative  method  is  adapted  to  the  improvement 
of  the  breeds  of  horses,  or  to  the  development  of  high- 
grade  horses.  There  has  been  Httle  cooperative  horse- 
breeding  work  done  in  the  United  States.  There  are 
many  instances  in  which  groups  of  farmers  have  pur- 
chased stallions  for  the  use  of  members,  but  these  or- 


106  Cooperation  in  Agriculture 

ganizations  have  rarely  been  fonned  on  the  cooperative 
plan. 

The  way  to  improve  the  horses  of  a  community  is  first 
to  decide  which  breed  and  type  of  horse  suits  the  locaUty 
and  the  requirements  of  the  farmers  best,  and  then  breed 
only  the  best  mares  to  a  good,  sound,  pure-bred  stallion. 
The  farmers  of  a  community,  representing  the  ownership 
of  seventy-five  to  eighty  mares,  can  join  together  and 
organize  on  the  cooperative  plan  to  purchase  a  stallion, 
each  member  paying  his  share  of  the  cost  in  proportion 
to  the  number  of  mares  to  be  bred  by  each.  The  associa- 
tion then  sends  a  representative  to  a  stock  farm  abroad 
or  in  the  United  States  to  select  the  stallion.  The  stal- 
lion is  taken  care  of  by  one  of  the  members  of  the  associa- 
tion. Under  this  system,  the  farmers  of  a  community 
can  secure  a  pure-bred  stallion  of  the  desired  breed  at 
a  lower  cost  than  under  any  other  method. 

The  company  system  of  horse-breeding.  —  The  pur- 
chasing of  stalUons  for  community  use  has  been  adopted 
to  a  very  large  extent  in  the  Central  West  and  in  the  ex- 
treme western  states,  especially  in  California.  The 
method  commonly  followed  is  known  as  the  "company 
system."  It  consists  of  the  organization  of  a  group  of 
farmers  by  a  dealer  or  company  and  the  subsequent  sale 
of  a  stallion  to  the  organization.  The  system  is  described 
by  Rommel,^  who  in  contrasting  it  with  the  cooperative 
system  of  ownership  says :  — 

"The  company  system  of  selling  stalUons  used  by  many 

*  Circular  124,  Bureau  of  Animal  Industry,  U.  S.  Department  of  Ag- 
riculture, "  Suggestions  for  Horse  and  Mule  Raising  in  the  South,"  by 
George  M.  Rommel. 


Breeders^  and  Growers^  Association  107 

importers  and  breeders  is  applied  in  the  opposite  manner. 
A  representative  of  a  stallion  owner  visits  a  community 
and  himself  proceeds  to  organize  a  company.  He  fre- 
quently associates  some  prominent  man  with  him,  giving 
him  a  share  of  stock  for  his  influence.  When  sufficient 
men  come  in  to  cover  the  selling  price  of  the  stallion  at 
the  fixed  price  for  shares,  each  member  gives  his  note  for 
the  amount  represented  by  his  share,  the  agent  discounts 
these  notes,  and  the  horse  is  sold.  It  is  an  unfortunate 
thing  that  this  company  method  of  selling  stallions  is 
used.  Many  horsemen  condenm  it  strongly,  even  though 
they  may  use  it.  Its  existence  is  condoned  on  the  plea 
that  if  it  were  not  used  the  horses  would  not  be  sold ;  that 
the  horse  must  be  taken  to  the  buyer,  because  the  buyer 
will  not  go  to  the  horse.  That  may  have  been  true  in 
the  Central  West  several  years  ago,  and  it  may  be  true 
in  some  parts  of  the  South  to-day,  but  in  this  day  of  tre- 
mendous prices  for  horses  of  all  kinds  it  seems  strange 
that  a  really  good  horse  cannot  be  sold  on  its  merits. 

"The  decline  of  the  company  system  of  selling  in  the 
com  belt  is  being  followed,  by  the  adoption  of  the  public 
sale  by  some  breeders,  and  the  firms  that  use  the  company 
system  most  extensively  are  carrying  it  into  the  South  and  • 
far  West,  where  less  experience  has  been  had  with  it. 
There  is  little  doubt  that  the  people  of  these  sections,  too, 
will  soon  find  out  the  faults  of  the  system,  and  we  can  look 
forward  to  the  time  when  it  shall  have  passed  from  us 
forever.  The  objections  to  the  system  are  its  expensive- 
ness  and  general  unreliability.  To  send  an  agent  into 
the  field  for  several  weeks  to  sell  one  horse  (and  often  the 
horse  is  with  him,  and  a  groom  also),  to  pay  this  agent's 


108  Cooperation  in  Agriculture 

commission  and  the  discount  on  the  notes,  piles  up  a 
tremendous  expense  bill,  which  must  be  added  to  the 
cost  of  the  horse  and  paid  by  the  purchasers.  Stallion 
owners  estimate  that  it  costs  on  an  average  about  $1000 
to  sell  a  stallion  by  the  company  system.  A  home-or- 
ganized company  could  send  a  man  to  Europe  for  a  horse 
at  a  smaller  expense  than  that. 

"The  unreliability  of  the  system  rests  on  the  fact  that, 
under  the  law,  firms  are  liable  for  the  acts  of  their  agents 
only  when  agents  act  within  the  limits  of  their  authority. 
If  a  firm  wishes  to  do  so,  when  a  purchasing  company 
finds  an  agent's  promises  of  no  value,  it  can  retire  behind 
the  excuse  that  the  agent  exceeded  his  authority.  How- 
ever, there  are,  no  doubt,  more  honest  agents  than  dis- 
honest ones,  just  as  there  are  more  honest  stallion  owners 
than  dishonest  ones. 

"The  element  of  .unreliability  is  of  course  not  always 
present  in  the  sale  of  a  horse  by  the  company  system,  for 
the  representations  of  an  honest  agent  of  an  honest  firm 
can  be  depended  on  to  the  letter.  But  no  firm  can  sell 
a  horse  in  this  way  without  great  cost  to  the  purchasers,  in 
many  cases  more  than  the  horse  is  really  worth,  and  in 
most  cases  more  than  the  shareholders  can  ever  hope 
to  get  out  of  their  investment.  The  system  has  one  great 
merit,  namely,  that  it  is  taking  many  good  horses  into 
sections  of  the  country  where  they  are  sorely  needed, 
and  probably  the  value  of  such  horses  to  a  community 
will  be  equal  in  the  long  run  to  the  price  paid  for  them, 
although  this  may  not  show  in  the  books  of  the  companies 
which  purchase  them." 


Breeders'  and  Growers'  Association  109 


COOPERATIVE  CROP  IMPROVEMENT 

In  recent  years,  a  great  deal  has  been  said  about  the 
improvement  of  farm  crops  by  breeding  and  selection. 
Those  who  have  been  working  along  these  lines  are  a  few 
individual  plant-breeders,  the  colleges,  the  experiment 
stations,  and  the  departments  of  agriculture.  Their 
object  has  been  to  establish  the  principles  which  govern 
the  improvement  of  crops  and  to  develop  seed  of  improved 
varieties  that  will  produce  increased  yields,  or  that  are 
superior  in  some  other  way  to  the  varieties  now  commonly 
grown. 

It  is  well  understood  by  seed-growers  that  a  variety 
can  be  kept  true  only  by  the  most  rigid  selection  of  seed 
from  plants  that  approach  the  ideal  type.  Varieties  of 
corn  usually  run  out  in  seven  or  eight  generations  unless 
the  seed  is  selected  with  great  care.  On  the  other  hand, 
the  yields  of  the  standard  varieties  may  be  increased; 
hardy,  prolific,  and  disease-resistant  types  may  be  de- 
veloped with  local  adaptations  to  soil  and  climate,  and 
other  desirable  characteristics  may  be  perpetuated  by 
the  use  of  selected  seed  from  plants  which  are  similar  to 
the  type  desired. 

Besides  the  study  of  the  principles  of  plani  improve- 
ment, the  public  institutions  have  done  much  to  increase 
the  value  of  the  staple  farm  crops  by  the  development 
and  wide  distribution  of  seed  of  improved  varieties. 
Private  individuals  have  also  done  a  large  amount  of 
this  work,  and  associations  have  been  organized  for  the 
development  of  seed-breeding  and  for  the  improvement 
of  farm  crops  through  the  systematic  use  of  seed  of  im- 


110  Cooperation  in  Agriculture 

proved  varieties.  As  an  example  of  the  practical  seed- 
breeding  work  of  a  public  institution,  the  Kansas  Agri- 
cultural Experiment  Station,  in  cooperation  with  the 
United  States  Department  of  Agriculture,  has  produced 
improved  strains  of  wheat,  com,  and  other  crops,  and 
from  1908  to  1910,  according  to  Professor  Ten  Eyck,  has 
distributed  more  than  25,000  bushels  of  well-bred  seed 
of  standard  crops,  including  15,000  bushels  of  seed  wheat, 
3000  bushels  of  seed  com,  2000  bushels  of  seed  oats, 
barley,  and  emmer,  2000  bushels  of  kaffir  com  and  broom- 
corn,  and  smaller  quantities  of  other  seeds.  The  improved 
strains  of  seed  are  developed  on  the  college  farm  at  Man- 
hattan and  on  the  substation  farms,  the  seed  is  either 
distributed  or  sold  to  the  farmers,  and  the  station  encour- 
ages them  to  continue  to  improve  the  varietal  strains  by 
further  selection  and  care.  It  cooperates  with  the  farm- 
ers who  receive  the  seed  by  making  a  list  of  those  who 
have  "college-bred"  seed  for  sale  and  by  distributing  the 
lists  throughout  the  state.  The  crop  breeders  who  co- 
operated with  the  station  in  1910  sold  30,000  bushels  of 
seed  wheat  and  10,000  bushels  of  improved  seed  corn. 
This  type  of  work  is  being  developed  more  extensively 
at  the  county  substations  at  the  present  time,  and  im- 
proved seed  will  be  distributed  even  more  widely  by  the 
Kansas  Station  in  the  future.  Professor  Ten  Eyck  es- 
timates that  from  one-third  to  one-half  of  the  total  area 
planted  to  com  in  1911  in  Kansas  was  planted  with  well- 
bred  seed.  The  improvement  of  farm  crops  through  the 
development  of  seed  of  improved  varieties  is  still  a  pio- 
neer work  in  the  United  States.  It  is  certainly  useful 
work,  and  until  the  principles  of  plant  improvement  and 


Breeders'  and  Growers^  Association  111 

their  practical  application  to  agricultural  conditions  are 
more  generally  understood  by  the  farmers,  it  may  be  a 
wise  public  policy  for  institutions  to  develop  and  distrib- 
ute seeds  that  are  resistant  to  disease,  that  yield  prolifi- 
cally,  that  show  peculiar  adaptation  to  local  conditions, 
or  that  exhibit  other  superior  qualities.  The  institutions 
can  also  lead  or  assist  in  helping  the  farmers  produce  their 
own  superior  strains  of  seed  through  individual  or  asso- 
ciated effort. 

The  improvement  of  farm  crops,  however,  must  ul- 
timately rest  with  the  farmers  themselves.  They  can 
form  associations  for  the  purpose  of  developing  improved 
seeds,  adopt  a  plan  for  seed-growing  and  distribution, 
supply  themselves  with  seed  for  crop  production,  sell 
the  surplus,  and,  in  the  end,  increase  the  yields  of  the 
staple  farm  crops,  or  produce  crops  that  are  superior  in 
other  ways.  As  farmers'  organizations  are  developed, 
the  demand  on  public  institutions  for  work  of  this  char- 
acter will  grow  less;  their  efforts  can  then  be  directed 
exclusively  towards  the  investigation  of  the  underlying 
principles  of  plant-breeding,  while  the  farmers  will  carry 
forward  the  practical  improvement  of  crops,  helped  and 
directed  by  the  public  institutions,  but  working  in  accord- 
ance with  plans  which  are  a  part  of  an  organized  farmers' 
movement. 

Organization  for  Crop  Improvement 

The  improvement  of  crops  through  the  development 
of  better  strains  of  seed  can  be  handled  most  effectively 
when  the  producers  in  a  community  who  are  interested 
in  a  single  crop  unite  to  improve  the  crop  in  that  locality. 


112  Cooperation  in  Agriculture 

The  local  organization  is  the  unit  for  local  crop-improve- 
ment because  the  local  strains  that  are  developed  usually 
give  better  results  in  that  community  than  the  best-bred 
seed  of  other  localities.  The  introduced  seed  may  give 
equally  good  or  better  results  after  it  has  grown  two  or 
three  years  in  a  new  locality,  but  until  it  is  acclimatized, 
a  variety  that  has  been  developed  in  a  distant  place  sel- 
dom equals  the  best  locally  developed  strains.  The  plan 
becomes  still  more  effective  when  the  local  associations 
federate  into  a  state  organization  to  act  for  the  local 
associations  in  the  distribution  and  sale  of  surplus  seed 
and  to  assist  the  local  associations  through  expert  advice 
and  direction  in  making  their  practical  crop-improvement 
work  more  effective.  The  farmers  have  already  organized 
in  some  states  for  crop-improvement  purpose,  the  most 
important  work  having  been  done  among  the  corn-growers 
in  the  Central  West.  This  method  is  followed  by  the 
wheat-growers  also,  and  by  the  producers  of  tobacco, 
cotton,  vetch,  and  other  farm  crops.  Within  the  limits  of 
this  work,  it  is  not  practical  to  discuss  all  of  these  efforts. 
An  understanding  of  the  movement  and  its  relation  to 
the  cooperative  organization  of  agriculture  may  be  had 
by  a  discussion  of  the  work  of  the  breeders  of  com. 

Corn-breeding  Associations 

The  first  organization  of  the  individual  corn-breeders 
of  a  state  occurred  in  1899  in  Illinois.  Through  the  efforts 
of  A.  D.  Shamel,  who  was  studying  corn-breeding  at  the 
Experiment  Station,  the  Illinois  Corn-breeders'  Association 
was  formed.  Mr.  Shamel  says  that  the  object  of  this 
association  was  to  develop  improved  methods  of  seed- 


Breeders'  and  Growers^  Association  113 

com  selection  and  distribution  and  to  establish  standards 
for  the  business  of  raising  improved  seed.  He  says  further 
that  several  important  steps  were  taken  to  draw  up  rules 
for  the  conduct  of  this  business,  which  were  generally 
looked  upon  as  visionary  but  which  have  become  estab- 
lished methods  of  procedure  the  seed-corn  world  over. 
The  first  was  that  these  seed-corn  breeders  agreed  to  send 
out  seed-corn  in  the  ear,  unless  otherwise  ordered.  In 
this  way,  the  customers  could  get  a  definite  idea  of  the 
quality  of  seed  purchased.  It  had  previously  been  a 
regular  practice  of  seed-corn  supply  houses  to  send  out 
shelled  seed,  frequently  of  inferior  quality  and  of  doubtful 
origin,  without  much  fear  of  detection.  The  importance 
of  this  step  at  that  time  can  be  fully  appreciated  only  by 
those  who  lived  through  those  pioneer  days.  As  soon  as 
the  great  seed  houses  realized  that  the  movement  for 
better  seed-corn  thus  begun  was  likely  to  prove  successful, 
they  began  a  campaign  of  attack  that  would  have  dis- 
mayed individuals  working  alone,  but  did  not  deter  this 
cooperative  body  of  independent  men.  Many  unscrupu- 
lous seed-corn  men  were  forced  out  of  business  as  a  conse- 
quence of  the  revelations  brought  out  by  the  discussions 
then  awakened  in  farmers'  institutes,  in  agricultural 
papers,  and  at  com  shows,  com  clubs,  and  in  other  meet- 
ings. The  business  of  these  seed-corn  breeders  increased 
by  leaps  and  bounds.  Ordinary  seed-corn  that  sold  at 
75  cents  per  bushel  was  replaced  by  improved  seed  at 
$2.50  per  bushel,  while  many  of  the  breeders  of  the  im- 
proved strains  cannot  now  supply  the  demand  at  $5 
to  SIO  per  bushel.  The  Illinois  association  developed 
methods  of  preserving  and  improving   the    established 


114  Cooperation  in  Agriculture 

types  that  were  adapted  to  particular  soils  and  climatic 
conditions  by  continually  selecting  the  seed  to  a  stand- 
ard type  and  by  detasseling  the  plants  of  these  types 
to  prevent  self-pollination,  and  by  a  rigid  selection  of 
seed  ears  for  planting.  The  association  encouraged  the 
holding  of  com  shows,  and  furnished  experts  to  judge 
the  displays.  It  held  annual  meetings  for  a  general  dis- 
cussion of  the  results  of  the  year  and  for  the  consideration 
of  new  plans  of  work. 

The  Illinois  Corn-breeders'  Association  has  been  fol- 
lowed by  the  starting  of  many  similar  movements  among 
the  corn  growers  and  the  growers  of  other  crops  in  dif- 
ferent states.  The  state  organizations  have  sometimes 
formed  societies  among  the  growers  for  local  crop  improve- 
ment, the  membership  of  fifty  local  and  county  com  im- 
provement associations  affiliated  with  the  Ohio  Com 
Improvement  Association  numbering  more  than  twenty- 
three  hundred.  According  to  C.  P.  Hartley  of  the  United 
States  Department  of  Agriculture,  state  corn-growers' 
and  corn-breeders'  associations  had  been  organized  in  1911 
in  Connecticut,  Delaware,  Illinois,  Indiana,  Iowa,  Kansas, 
Maryland,  Missouri,  Minnesota,  Nebraska,  Ohio,  Okla- 
homa, Texas,  and  Wisconsin.  The  immense  increase  in 
the  yield  of  com  in  recent  years  in  the  Central  West  is 
attributed  primarily  to  the  use  of  better  strains  of  seed 
that  have  been  developed  and  grown  and  sold  by  the 
members  of  the  corn-breeders'  organizations.  In  Iowa, 
the  members  who  are  most  prominent  in  the  corn-improve- 
ment associations  are  those  who  have  been  active  in  the 
agricultural  short  courses,  the  farmers'  institutes,  and  the 
grain-judging  contests.    The  secretary  of  the  Iowa  State 


Breeders'  and  Growers^  Association  115 

Association,  W.  L.  Bowman,  says :  "The  corn  of  this  state 
has  been  indeed  developed  very  much  in  the  last  five  or 
six  years,  since  so  many  of  our  members  have  taken  an 
active  interest  in  com-breedifig.  A  few  years  ago  it  was 
almost  impossible  to  buy  a  carload  of  yellow  com  or  a 
carload  of  white  com,  but  to-day  a  person  can  buy  a 
whole  trainload  of  these  types,  due  to  the  fact  that  our 
corn-growers  have  appreciated  the  advantages  of  having 
pure  breeds  of  corn." 

Plans  of  the  Illinois  Corn-breeders'  Association.  — 
The  Illinois  Corn-breeders'  Association  is  composed  of 
those  persons  engaged  in  the  growing  of  pure-bred  com 
on  land  worked  by  themselves,  or  under  their  control 
during  the  preparation  of  the  soil,  the  planting,  cultivat- 
ing, and  harvesting  of  the  crop.  The  principles  of  the 
organization  are  suggestive  and  are  given  in  detail  to 
show  the  direction  which  an  organization  of  this  type  may 
take.  As  set  forth  in  the  constitution  and  by-laws,  the 
object  of  the  association  is  :  — 

I' First.   To  establish  distinct  types  and  breeds  of  com. 

"Second.  To  encourage  and  promote  the  growing  of  pure- 
bred corn  for  seed  piu-poses  throughout  the  state  of  Illinois. 

!' Third.  To  perfect  new  and  better  methods  of  growing  and 
breeding  corn  in  order  to  influence  desired  characteristics. 

!' Fourth.  To  protect  the  farmer  who  shall  desire  to  purchase 
pure-bred  seed  by  furnishing  information  such  as  wiU  instruct 
him  in  distinguishing  the  breeds  of  corn  and  giving  him  the  names 
of  reUable  growers. 

"Fifth.  To  aid  in  the  procuring  of  such  legislation  or  in  doing 
any  other  acts  as  shall  protect  the  growers  of  pure-bred  corn  in 
their  efforts  to  furnish  the  farmer  with  seed-corn  of  the  breed 
desired. 

"Sixth.  To  establish  a  score  card  for  each  recognized  standard 
variety  of  corn.'' 


116  Cooperation  in  Agriculture 

TTie  rules  and  regulations  of  the  association  are  as 
follows :  — 

"Rule  1.  Members  of  this  association  may  sell  seed-corn 
either  on  the  ear  or  shelled,  as  ordered  by  the  purchaser,  but 
the  germination  test  must  be  the  same  whether  shelled  or  on 
the  ear. 

t'Rule  2.  No  member  of  the  association  shall  sell  or  offer  for 
sale  any  corn  for  seed  purjwses  other  than  is  grown  by  himself 
or  under  his  direction  and  for  seed  purposes,  and  the  type,  variety, 
and  quantity  must  be  reported  to  the  secretary  of  the  association 
not  later  than  the  second  Wednesday  in  December  of  each  year. 

"Rule  3.  Each  member  of  this  association  shall  conduct  his 
business  of  corn-breeding  and  selling  of  pure-bred  seed-corn  in 
such  manner  only  as  shall  be  for  the  elevation  of  the  reputation 
of  the  association  as  a  means  of  accomplishing  the  object  for 
which  it  was  organized. 

"Rule  4.  Each  member  shall  properly  test  the  vitality  of  the 
seed-corn  he  offers  for  sale,  and  if  less  than  90  per  cent  germinates 
he  shall  not  offer  it  for  sale." 

The  methods  of  corn-breeding  practiced  by  the  members 
of  the  association  are  as  follows  :  — 

1.  Selection  of  Seed  Ears 

"  (a)  Every  ear  of  com  to  be  considered  as  a  possible  seed  ear 
for  the  breeding  plot  must  be  selected  in  the  field  and  vnth  special 
reference  to  the  character  of  the  individual  corn  plant  upon 
which  it  is  produced. 

"(6)  Every  ear  which  is  ultimately  selected  for  the  breeding 
plot  must  conform  as  nearly  as  possible  in  appearance  and  physi- 
cal measurements  to  definite  and  desirable  standards. 

"  (c)  If  the  seed-corn  is  selected  by  mechanical  examination 
only  of  sections  of  kernels  for  improvement  in  composition,  the 
efficiency  of  the  selection  shall  be  determined  by  the  chemical 
analysis  of  at  least  two  eomp>osite  samples,  of  which  one  sample 
shall  represent  all  selected  ears  which  are  planted  in  the  breeding 


Breeders^  and  Growers'  Association  117 

plot,  and  the  other  sample  shall  represent  all  ears  which  are 
rejected  by  the  mechanical  examination. 

"(d)  If  the  seed-corn  is  selected  by  chemical  analysis  for 
improvement  in  composition,  the  composition  must  be  deter- 
mined of  each  individual  seed  ear  which  is  planted  in  the  breeding 
plot.'!. 

2.  The  Breeding  Plot 

"  (a)  The  breeding  plot  shall  contain  at  least  25  rows  of  com 
which  are  at  least  100  hills  long. 

"(6)  Each  separate  row  of  corn  in  the  breeding  plot  shall  be 
planted  with  a  separate  individual  ear. 

"  (c)  All  rows,  which  show,  as  a  whole,  marked  inferiority 
and  also  every  individual  corn-plant  which  may  show  marked 
inferiority,  in  whatever  row  it  may  be  found,  shall  be  carefully 
detasseled  before  the  pollen  matures. 

"  (d)  The  performance  record  of  each  individual  field  row  shall 
be  determined,  and  this  shall  include  an  accurate  determination 
of  the  total  weight  of  ear  corn  which  the  row  produces.'' 

3.  Selection  op  Seed  Rows 

"(a)  The  selection  of  seed-corn  for  the  next  year's  breeding 
plot  shall  be  confined  to  40  per  cent  of  the  field  rows ;  that  is, 
at  least  60  per  cent  of  the  field  rows  must  be  rejected  as  a  source 
of  seed  for  the  breeding  plot. 

"(6)  The  selection  of  the  individual  field  rows  from  which 
seed-corn  may  be  taken  shall  be  based  upon  the  performance 
record  of  the  row  as  a  whole,  but  with  special  reference  to  the 
yield  of  corn  which  the  row  produces,  which  in  all  cases  must  be 
ascertained  by  computation  from  at  least  100  consecutive  hills 
and  without  rejecting  vacant  hills. 

"It  is  the  intent  of  this  association  that  its  members  shall 
be  actual  breeders  or  improvers  of  corn  and  not  mere  growers  or 
producers  of  seed.  While  methods  may  vary  somewhat  as  to 
detail  in  accordance  with  the  ideals  of  the  individual  members, 
in  their  breeding  operations,  certain  well-established  principles 
are  recognized,  fundamental  among  which  are  the  following :  — 


118  Cooperation  in  Agriculture 

"Every  individtuil  com  plant  is  possessed  of  a  distinct  individ- 
uality which  corresponds  to  the  individuality  of  animals. 

"For  guidance  in  conducting  the  breeding  plot,  certain  recom- 
mendations founded  upon  these  well-established  principles  are 
here  given  as  being  advisable  to  follow." 

Ear  Row  Breeding  Plot. 

"Seed  ears  of  desired  tjrpe  and  quality  should  be  tested  by 
planting  each  in  a  separate  row  in  the  plot  in  order  to  prove  its 
productivity  as  weU  as  to  test  the  transmission  of  other  charac- 
ters.'J 

Size  of  Breeding  Plot. 

"The  larger  the  number  of  ears  included  in  this  plot,  the  better 
it  will  be.  This  is  on  account  of  two  reasons,  first,  for  the  sake 
of  affording  as  great  a  range  of  selection  as  possible  ;  and  second, 
to  avoid  future  detrimental  effects  of  in-breeding  resulting  from 
the  establishment  of  too  close  relationships. 

"  A  system  of  96  rows  is  recommendable  as  explained  in  BuUetia 
No.  100  of  the  Illinois  Agricultural  Experiment  Station.  As 
regards  length  of  rows  it  may  be  said  that  in  general  the  longer 
the  rows,  the  better  the  test.  Rows  at  least  100  hills  long  are 
recommended." 

Registration. 

"In  order  to  keep  the  pedigree,  each  seed  ear  should  be  given 
a  register  number  to  correspond  to  the  row  in  which  it  is  planted. 
For  the  sake  of  obtaining  aU  possible  information  regarding  the 
connection  between  type  of  ear  and  producti\ity  in  each  of  our 
varieties,  it  is  well  to  record  at  the  same  time  some  description  of 
each  seed  ear.  This  may  include  such  data  as  size,  weight, 
number  of  kernels,  notes  concerning  type  of  kernel  and  of  ear, 
etc." 

Performance  Record. 

"At  harvest  time  the  performance  record  of  each  row  should 
be  determined  by  weighing  the  total  amount  of  ear  com  produced. 
This  performance  record  may  well  include  other  desirable  points 


Breeders'  and  Growers^  Association  119 

such  as  number  of  ears,  or  notes  regarding  type  or  si)eeial  qual- 
ities. 

i'This  record  forms  the  basis  for  future  selection.  It  is  rec- 
ommended to  confine  the  selection  to  one-quarter  or  a  smaller 
proportion  of  the  total  nimiber  of  rows  tested." 

Detasseling  to  Prevent  In-breeding. 

"For  the  sake  of  preventing  in-breeding  it  is  recommended 
to  detassel  all  the  plants  either  in  every  alternate  row,  or  in  case 
the  rows  are  long  enough,  in  one-half  of  every  row  at  alternate 
ends,  taking  seed  only  from  such  detasseled  plants." 

Multiplying  Plot  and  Commercial  Yield. 

"In  order  to  increase  the  seed,  a  multiplying  plot  should  be 
planted  in  which  the  seed  used  shall  come  only  from  the  selected 
rows  of  the  breeding  plot.  The  commercial  field  should  be  planted 
from  only  the  best  obtainable  seed  produced  in  the  midtiplying 
plot." 

This  kind  of  local  cooperative  effort  should  be  applied 
to  the  improvement  of  all  kinds  of  farm  crops.  An 
association  for  crop  improvement  is  easy  to  effect;  it 
can  be  made  the  nucleus  for  the  discussion  of  various 
agricultural  matters,  and  the  center  for  various  efforts 
to  build  up  a  better  country  life.  Organizations  that 
are  formed  by  the  farmers  to  bring  about  better  business 
conditions  do  not  always  lend  themselves  as  a  center  for 
the  improvement  of  the  social  and  educational  conditions 
surrounding  an  agricultural  community.  A  crop  improve- 
ment association  is  founded  partly  on  educational  prin- 
ciples, and  the  greatest  advantage  of  cooperation  in  the 
upbuilding  of  a  community  naturally  results  from  efforts 
of  this  kind. 


CHAPTER  VII 

COOPERATION  IN  THE  HANDLING,  DISTRIB- 
UTING AND  SALE  OF  FARM  PRODUCTS,  AS 
ILLUSTRATED  IN  GRAIN,  DAIRY  PRODUCTS, 
EGGS,  AND  COTTON 

The  handling,  distributing,  and  marketing  of  farm 
products  through  cooperative  associations  is  more  highly 
developed  than  any  other  form  of  agricultural  cooperation. 
Hundreds  of  associations  have  been  formed  to  standardize 
the  harvesting,  handling,  grading,  warehousing,  distribut- 
ing, and  selling  of  farm  products,  to  prevent  disastrous 
competition  by  bringing  about  an  equitable  distribution  of 
the  product  throughout  the  country,  and  to  handle  the 
products  in  other  ways  collectively  rather  than  individu- 
ally. These  organizations,  which  are  more  numerous  in 
the  Central  West  and  Western  states,  may  also  be  engaged 
in  some  phases  of  cooperative  production  and  in  the  co- 
operative purchase  and  sale  of  supplies.  The  handling, 
distribution,  and  sale  of  farm  products  have  been  organized 
most  extensively  in  the  dairy  industry  around  the  co- 
operative creameries  and  cheese  factories ;  in  connection 
with  the  cooperative  grain  elevator  companies  in  the 
Central  West;  and  among  the  fruit-growers,  especially 
in  California,  the  Northwestern  states,  and  other  irrigated 
districts.  The  cooperative  method  is  also  developed  to 
a  greater  or  less  extent  in  the  cotton  industry,  in  the  rice 

120 


PLATE  VII.  — Types  of  Citrus  Fruit  Packing-houses.     Chapters  IV,  VIII. 


LkMO.V    and    I  )|{  \N(,K    l\\(KIXG-HOl  ;SE.       Ki\  EUrtlUK,    CaLiiuKMA. 


Lemon  Palki.ng-iiousk.     L  tlaxu,  California. 


Cooperation  121 

and  tobacco  industries,  among  the  vegetable  growers 
in  the  West  and  Southwest  and,  to  some  extent,  in  the 
Eastern  states.  The  cooperative  marketing  of  farm  prod- 
ucts is  essentially  a  central-western  and  western  move- 
ment, though  organizations  have  been  formed  in  different 
industries  in  nearly  every  state  in  the  Union. 

There  has  been  a  greater  need  for  cooperation  in  the 
distribution  and  sale  of  farm  products  than  in  other  agri- 
cultural activities.  The  distribution  and  sale  of  farm 
products  has  been  controlled  by  the  brokers,  jobbers, 
commission  merchants,  and  other  distributing  agencies. 
These  agencies  have  often  reduced  the  returns  to  the 
farmer  to  such  an  extent  that  his  capital  and  labor  have 
brought  an  inadequate  return.  The  dealers  in  farm  prod- 
ucts have  in  many  instances  eliminated  competition  and 
have  then  dictated  the  price  which  the  producer  should 
receive  for  his  crops.  In  other  cases,  they  have  divided 
the  territory  among  themselves,  and,  like  the  milk  dis- 
tributors in  some  of  the  large  cities,  they  have  acquired 
a  monopolistic  control  of  the  facilities  of  distribution  and 
have  prevented  the  sale  of  farm  products  by  any  other 
agency  to  the  local  dealers  or  to  the  consumers.  In  their 
plans  the  dealers  have  sometimes  been  helped  by  the 
transportation  companies,  the  private  car  lines,  and  the 
auction  companies,  and  other  abuses  and  discriminations 
have  crept  in  and  have  forced  the  farmers  to  organize 
to  meet  these  conditions  and  to  protect  their  own  interests, 
the  individual  farmer  acting  by  himself  being  helpless 
in  the  face  of  them. 

It  is  not  possible  in  this  work  to  discuss  all  of  these 
unifying  tendencies  in  American  agriculture.     The  prin- 


122  Cooperation  in  Agriculture 

ciples  that  underlie  the  efforts  of  the  farmers  to  handle 
and  sell  their  crops  through  cooperative  associations  will 
be  set  forth  in  connection  with  the  grain,  dairy,  eggs,  cot- 
ton, and  horticultural  industries  (the  last  subject  in  Chap- 
ter VIII). 

THE  farmers'  cooperative  GRAIN  ELEVATORS 

In  1911,  there  were  nearly  eighteen  hundred  farmers* 
grain  elevator  companies  in  the  United  States,  distributed 
approximately  as  follows :  Iowa,  three  hundred  and 
twenty-seven ;  North  Dakota,  three  hundred  and  fifteen ; 
South  Dakota,  two  hundred  and  twenty-two;  Minne- 
sota, two  hundred  and  sixty-six;  Illinois,  two  hundred 
and  thirty-five ;  Nebraska,  one  himdred  and  ninety-three ; 
Kansas,  one  hundred  and  twenty-six;  Wisconsin,  thirty- 
eight;  Oklahoma,  thirty-three;  Indiana,  twenty-four; 
Michigan,  twenty;  Washington,  eighteen;  Montana, 
sixteen;  Ohio,  fourteen;  Texas,  five;  Colorado,  four; 
Oregon,  three;  Missouri,  three;  Arkansas,  two;  Idaho, 
one;  and  Kentucky,  one.  These  elevators  cost  from 
$3000  to  $25,000  each.  The  membership  in  an  associa- 
tion aveiages  about  seventy  to  two  hundred  and  twenty- 
five.i  The  output  of  the  large  elevators  usually  varies 
from  40,000  to  100,000  bushels  of  grain,  some  of  the  largest 
handling  a  million  bushels.  The  smaller  elevators,  hold- 
mg  from  20,000  to  25,000  bushels,  cost  from  S2600  to 
$3000.  This  means  that  there  are  not  fewer  than  225,000 
farmers  connected  with  the  cooperative  elevator  asso- 
ciations, that  their  investment  approximates  $18,000,000, 
and  that  they  handle  270,000,000  bushels  of  grain,  or 

>  "Cooperation  among  Fanners,"  J.  L.  Coulter,  1911. 


Cooperation  123 

about  forty  per  cent  of  the  total  amount  shipped  from 
the  sections  where  the  farmers'  elevators  have  been  built. 

The  Grain-distributing  System 

The  American  grain  business  is  stupendous  in  volume. 
The  average  annual  production  for  the  last  three  years 
had  equaled  about  117,000,000  tons,  of  which  corn  formed 
about  sixty-four  per  cent,  wheat  sixteen  and  six-tenths 
per  cent,  and  oats  fourteen  and  two-tenths  per  cent,  the 
remainder  being  distributed  over  barley,  rye,  rice,  flax- 
seed, and  buckwheat.  According  to  data  furnished  by 
the  Bureau  of  Statistics  of  the  United  States  Department 
of  Agriculture,  twenty-two  and  eight-tenths  per  cent  of 
the  com  crop  is  shipped  out  of  the  county  where  grown, 
fifty-seven  and  seven-tenths  per  cent  of  the  wheat,  thirty 
and  eight-tenths  per  cent  of  the  oats,  and  fifty-three  and 
one-tenth  per  cent  of  the  barley.  The  distribution  of 
the  grain  crop  is  conducted  somewhat  along  the  following 
lines :  The  grain  is  first  brought  from  the  farm  to  the 
country  elevators,  where  it  is  accumulated  for  shipment. 
The  elevators  are  owned  by  local  grain  dealers,  by  line- 
elevator  companies,  or  by  the  producers.  The  "railways 
may  own  or  have  an  interest  in  the  elevators.  The  grain 
is  shipped  by  these  dealers  to  primary  markets,  such  as 
Chicago,  Minneapolis,  St.  Louis,  Kansas  City,  Omaha, 
Detroit,  Duluth,  and  to  other  railway  centers,  where  it 
is  concentrated  in  enormous  terminal  elevators.  After 
being  scoured  and  blended  and  prepared  for  shipment,  it 
is  forwarded  to  further  distributing  points,  such  as  Buffalo, 
to  the  interior  mills,  to  the  seaboard,  and  to  foreign  coun- 
tries. 


124  Cooperation  in  Agriculture 

The  Method  of  Selling  the  Grain 

Formerly  the  farmer  sold  his  grain  to  a  local  merchant 
or  consigned  it  to  a  commission  merchant  in  one  of  the 
primary  markets,  where  it  was  sold  to  a  dealer.  The  lo- 
cal merchant  who  bought  from  the  farmer  shipped  the 
grain  to  a  commission  merchant  or  sold  it  to  a  dealer  in 
a  primary  market.  In  the  course  of  time,  the  local  dealers 
were  largely  repilaced  by  well-organized  local  firms  which 
specialized  in  grain  buying  and  selling,  and  which  built 
elevators  at  the  shipping  points.  Between  1889  and  1900, 
large  corporations  were  formed  in  Minneapolis,  Milwaukee, 
Kansas  City,  and  Chicago.  They  built  elevators  along 
different  lines  of  railroads  and  placed  in  charge  their  own 
buyers  at  the  local  shipping  stations.  Their  elevators 
were  known  as  line  elevators  to  distinguish  them  from  the 
elevators  owned  by  the  local  grain  dealers.  The  terminal 
grain  corporations  were  also  owners  of  warehouses  in  the 
primary  markets.  In  several  of  the  states,  such  as  Illi- 
nois, Nebraska,  the  Dakotas,  Minnesota,  and  Iowa,  the 
grain  dealers  have  organized  into  "Grain  Dealers'  Asso- 
ciations" to  improve  the  conditions  surrounding  the  grain- 
handling  business.  There  is  still  a  large  amount  of  grain 
shipped  direct  by  the  farmers  to  commission  merchants 
outside  of  the  large  primary  markets,  but  a  large  propor- 
tion of  the  crop  is  purchased  by  the  local  grain  dealers 
or  the  line-elevator  companies. 

Origin  of  the  Farmers^  Elevators 

The  farmers'  cooperative  elevator  companies  grew  out 
of  abuses  in  the  grain-distributing  system  as  handled  by 


Cooperation  125 

the  local  grain  dealers  and  the  line-elevator  companies. 
Twenty  years  ago,  there  were  from  one  to  ten  local  grain 
buyers  at  each  producing  station.  Some  of  the  buyers 
owned  elevators ;  others  had  no  storage  facilities  and  were 
known  as  track  buyers,  who  loaded  the  grain  on  the  car 
from  the  farmer's  wagon.  Competition  was  keen  among 
the  buyers,  and  the  farmer  received  a  good  price  for  his 
grain,  but  in  the  end  the  system  of  free  competition  proved 
disastrous  to  many  of  the  grain  dealers.  By  1900,  the 
grain  dealers'  associations  that  were  formed  to  advance 
the  mutual  interests  of  the  members  became  the  predomi- 
nating factor  in  the  grain  business  in  the  Central-western 
states.  They  had  driven  out  most  of  the  smaller  dealers ; 
they  coerced  the  conmiission  merchants  by  refusing  to 
ship  to  any  merchant  who  handled  grain  for  an  independ- 
ent track  buyer;  they  obtained  the  cooperation  of  the 
railroads  by  securing  a  rule  under  which  cars  were  re- 
fused to  a  shipper  unless  the  grain  was  on  the  right  of  way 
of  the  railroad  at  the  time  the  car  was  ordered.  This 
rule  prevented  the  shipment  of  grain  by  the  independent 
track  buyers  and  prevented  the  consignment  of  grain  by 
the  farmer  as  well.  With  the  independent  buyers  elimi- 
nated, the  grain  dealers'  associations  in  the  principal 
grain-growing  states  perfected  their  organization  and 
dictated  the  price  to  be  paid  to  the  farmers  each  week 
by  the  dealers  in  their  association.  It  is  said  that  they 
fixed  the  amount  of  grain  each  dealer  could  buy  and 
adopted  a  system  of  penalties  which  forced  a  dealer  who 
purchased  more  than  his  share  to  pay  to  the  association 
a  fine  varying  from  one  cent  a  bushel  on  com  and  oats 
to  ten  cents  a  bushel  on  timothy.     The  association  paid 


126  Cooperation  in  Agriculture 

an  amount  from  this  fund  to  a  dealer  who  received  less 
than  his  share.  The  efforts  of  the  large  grain  dealers 
were  backed  by  the  railroads.  They  refused  to  furnish 
cars  to  the  farmers  who  tried  to  ship  their  own  grain,  and 
often  denied  any  other  company  the  right  to  build  an 
elevator  on  its  property.  They  threw  their  influence 
with  the  large  companies,  thereby  discriminating  against 
the  small  shipper  and  producer  and,  in  the  end,  brought 
about  a  condition  of  affairs  which  led  to  the  passage  of 
the  Interstate  Commerce  Act,  to  many  of  the  anti-trust 
laws,  and  to  many  of  the  most  important  national  and 
state  laws  which  have  to  do  with  the  regulation  of  trans- 
portation. By  1900,  the  large  elevator  companies  con- 
trolled the  grain-buying  business  at  many  points.  They 
could  transact  their  business  more  economically  than  the 
small  grain  dealers.  They  had  better  storage  facilities 
at  the  primary  markets  and  larger  assortments  of  grain 
from  which  to  make  up  final  grades  for  shipment.  They 
forced  many  of  the  independent  dealers  to  sell  their  ele- 
vators to  the  syndicates.  Like  any  other  unregulated 
monopoly,  they  not  only  fixed  the  price  that  the  farmer 
was  to  receive  for  his  grain,  but  they  determined  the 
amount  of  dockage  he  should  be  assessed  and  the  grade 
into  which  his  grain  should  be  placed.  They  then  paid 
the  producer  from  ten  to  fifteen  cents  a  bushel  below  the 
price  in  Kansas  City  or  in  other  primary  markets,  after 
deducting  the  freight  and  a  reasonable  profit.  The  pro- 
ducer could  not  ship  independently.  The  rule  of  the  rail- 
road referred  to  prevented  it,  unless  he  was  the  owner  of 
an  elevator;  and,  if  he  shipped  a  carload  of  grain,  the 
conmiission  merchants  dared  not  handle  it  on  account  of 


Cooperation  127 

the  coercion  of  the  large  grain  dealers.  The  grain  pro- 
ducers were  square  against  an  unregulated,  predatory 
combination  of  dealers  who  fixed  the  price  that  the  farmer 
should  receive  and  the  conditions  under  which  his  grain 
should  be  handled  and  sold. 

At  this  point,  as  an  outgrowth  of  these  conditions,  the 
farmers'  cooperative  elevator  companies  were  formed. 
The  grain  growers  were  forced  to  meet  the  competition 
of  the  commercial  grain  handlers  by  forming  organizations 
which  were  equal  or  superior  to  those  already  in  the  field. 
The  producers  insisted  that  they  should  determine  to 
whom  their  grain  should  be  sold,  the  conditions  under 
which  it  should  be  sold,  and  that  the  railroads  should 
accord  them  the  same  privileges  that  they  extended  to 
other  shippers.  In  1889,  the  first  farmers'  elevator  com- 
pany was  organized  at  Rockwell,  la.,  where  the  farmers 
leased  an  elevator  and  proceeded  to  buy  and  sell  grain. 
They  were  subjected  to  the  most  vicious  competition  by 
the  grain  dealers  of  the  state.  In  1900,  two  more  com- 
panies were  formed.  In  1904,  thirteen  had  been  organized, 
and  in  1911,  there  were  more  than  three  hundred  and 
twenty-five  of  these  farmers'  elevator  companies  in  Iowa. 
They  handled  65,000,000  bushels  of  grain,  and  purchased 
200,000  tons  of  coal,  $750,000  worth  of  lumber,  machinery, 
flour,  feed,  and  other  supplies  used  by  the  grain  producers. 
The  cost  of  operating  the  larger  elevators  varies  from  one- 
half  to  one  per  cent  of  the  total  business  transacted,  while 
the  cost  to  the  smaller  elevators  is  about  two  per  cent  of 
the  total  volume  handled,  or  about  two  cents  a  bushel. 


128  Cooperation  in  Agriculture 

The  Plan  of  a  Farmers'  Elevator  Company 

The  plan  of  the  grain  producers  is  simple.  The  farmers 
in  a  locality  form  a  buying  and  selling  association  with 
capital  stock  varying  from  $2500  to  $20,000.  The  shares 
of  stock,  varjdng  from  $10  to  $100  each,  are  held  exclu- 
sively by  producers,  and  the  amount  an  individual  may 
own  is  usually  limited  to  prevent  the  control  of  the  asso- 
ciation by  a  few  individuals.  These  companies  have 
usually  been  incorporated  under  the  joint-stock  company 
laws  of  the  states.  '  The  earnings  are  generally  distrib- 
uted on  the  basis  of  capital,  the  dividends  sometimes 
running  as  high  as  one  hundred  per  cent.  The  articles 
of  incorporation  often  provide  that  each  stockholder 
may  have  but  one  vote,  regardless  of  the  number  of  shares 
that  he  owns.  In  some  of  the  companies,  the  surplus 
is  distributed  in  proportion  to  the  amount  of  grain  sold 
by  each  member,  after  paying  a  dividend  of  six  per  cent 
on  the  stock  and  retaining  a  surplus  of  a  few  thousand 
dollars  in  the  treasury.  Before  a  producer  may  sell  his 
stock,  the  associations  generally  require  him  to  offer  it 
to  the  company  either  to  be  purchased  or  to  be  placed 
by  the  association.  When  the  grain  association  has 
raised  sufficient  capital,  it  builds  or  leases  an  elevator 
holding  from  10,000  to  100,000  or  more  bushels  of  grain. 
it  provides  that  the  members  shall  sell  the  grain  to  the 
association,  though  a  member  is  permitted  to  sell  to  an 
outside  firm  by  paying  to  the  association  one  cent  a  bushel 
on  every  bushel  sold  in  this  manner.  By  this  provision,  the 
line  elevators  or  local  grain  dealers  can  purchase  from  an 
association  member,  and  in  so  doing  support  the  farmers' 


Cooperation  129 

associations  through  the  refund  of  one  cent  a  bushel.  This 
rule,  however,  is  not  always  legally  enforceable,  though  the 
refund  in  most  cases  is  paid  voluntarily  by  the  member 
who  sells  his  grain  outside  of  the  association. 

The  affairs  of  the  association  are  supervised  by  a  small 
board  of  directors.  An  expert  grain  buyer  is  selected 
as  manager  at  a  salary  of  $125  to  $150  per  month  or  is 
paid  on  a  profit-sharing  basis.  Sometimes  the  association 
is  managed  by  one  of  the  farmers  interested  in  its  forma- 
tion. The  association  pays  a  fair  market  price  for  the  grain, 
which  is  then  assembled  in  the  association  elevators. 
Where  competition  is  keen,  the  association  pays  the  termi- 
nal market  price  less  the  freight  and  assesses  the  cost  of 
operation  against  the  members  in  proportion  to  the  amount 
of  grain  contributed.  This  forces  the  competing  elevators 
to  handle  their  business  without  profit.  From  these 
elevators,  the  grain  is  loaded  into  cars  and  is  shipped  to 
the  interior  mills  or  to  the  primary  grain  markets,  where 
the  final  grades  are  made  and  where  agents  of  the  asso- 
ciation sell  it  to  the  terminal  elevators,  or  ship  it  to  the 
mills  in  the  United  States,  to  distributing  warehouses 
in  the  large  cities,  or  to  the  seaboard  for  export,  though 
sometimes  the  grain  is  shipped  direct  from  the  fanners' 
elevators  to  the  mills.  Under  the  farmers'  elevator  plan, 
the  grain  grower  is  paid  the  market  price  for  his  grain, 
and  at  the  end  of  the  season,  if  there  is  a  profit  from 
the  sale  of  the  grain,  receives  a  dividend  on  his  stock,  or 
the  profit  may  be  prorated  on  the  basis  of  the  volume 
of  business  transacted  by  each  member.  It  is  the  usual 
custom  of  these  companies  to  retain  a  surplus  varying 
from  $2000  to  $5000  in  order  to  be  in  a  strong  position 


130  Cooperation  in  Agriculture 

to  conduct  the  business  at  the  beginnmg  of  the  following 
year. 

The  farmers'  cooperative  grain  elevator  association 
usually  buys  grain  from  non-members.  It  then  becomes 
a  dealer  in  products  which  it  handles  for  its  own  members. 
It  may  also  be  a  purchasing  agent  for  supplies,  such  as 
coal,  lumber,  and  fertiUzer,  enormous  quantities  of  these 
supplies  being  handled  by  the  elevators  of  the  Central 
West  and  the  Northwest.  These  supplies  are  sold  to  both 
the  members  and  non-members  at  the  prevailing  prices, 
and  the  profit  is  divided  among  the  members  at  the  end 
of  the  year. 

There  have  been  many  failures  among  the  farmers* 
elevator  companies.  Their  management  has  often  been 
attempted  by  men  who  could  not  handle  the  business 
successfully  in  competition  with  the  experienced  managers 
of  the  line  companies  or  of  the  local  grain  dealers.  Many 
of  the  associations  have  been  loosely  organized,  and  when 
reverses  have  been  encountered,  the  cooperative  spirit 
among  the  members  has  waned.  Many  have  been  over- 
ambitious  and  have  branched  out  into  other  activities, 
such  as  stock-feeding  and  other  speculative  ventures. 
As  a  rule,  few  of  the  companies  have  succeeded  unless  they 
have  confined  their  efforts  to  the  distribution  and  sale  of 
grain,  and  unless  they  have  been  managed  by  men  who 
are  familiar  with  the  intricacies  of  the  grain  trade.  Many 
of  them  have  failed  when  they  ceased  to  pay  a  large 
dividend  at  the  end  of  the  season.  The  farmer  who  puts 
his  money  into  a  joint-stock  company,  the  form  under 
which  most  of  these  companies  are  organized,  usually 
becomes  dissatisfied  when  his  capital  does  not  earn  a 


Cooperation  131 

liberal  annual  interest,  unless  the  corporation  is  operated 
primarily  on  cooperative  principles. 

As  a  general  movement,  the  farmers'  cooperative  grain 
elevators  have  been  successful.  The  grain-growers  have 
not  yet  developed  a  comprehensive  marketing  sys- 
tem, but  their  companies  have  protected  the  producer 
against  the  tyranny  of  a  distributing  system  that  held 
this  product  in  its  grasp.  They  have  maintained  a  fair 
price  for  the  farmers ;  they  have  caused  the  grain  dealers 
at  each  shipping  point  to  grade  the  grain  according  to  its 
actual  quality ;  they  have  increased  the  purchasing  power 
of  the  communities  in  which  they  have  been  organized 
by  keeping  the  profit  at  home  rather  than  by  pajdng  it 
to  the  foreign  elevator  companies;  they  have  created 
competition  at  the  shipping  points  and  have  benefited 
the  railroads  by  increased  traffic. 

Ultimately,  the  success  of  the  farmers'  cooperative  ele- 
vators will  depend  on  the  federation  of  many  of  them  into 
central  organizations,  that  will  act  as  a  clearing  house  in 
handling  the  grain  of  each  local  elevator,  as  a  part  of  a 
comprehensive  distributing  and  marketing  system.  The 
central  agencies  will  build  terminal  elevators  at  the  primary 
markets  where  the  grain  of  the  local  associations  can  be 
assembled,  scoured,  blended,  shipped,  and  distributed. 
Up  to  this  time,  the  attempts  to  organize  these  companies 
into  central  agencies  have  not  been  successful  because 
the  farmers  have  been  unable  to  organize  effectively  enough 
to  compete  with  the  experienced  grain  dealers.  The  larger 
form  of  organization  is  a  matter  of  evolution,  and  as  the 
necessity  arises,  the  farmers'  cooperative  elevator  com- 
panies may  be  expected  to  overcome  the  obstacles  which 


132  Cooperation  in  Agriculture 

have  prevented  the  development  of  a  comprehensive  mar- 
keting system  in  the  past. 

A  Constitution  and  By-laws  of  a  Farmers'  Elevator  Company 

The  following  extracts  are  taken  from  the  constitution 
and  by-laws  issued  as  a  model  form  by  the  Farmers'  Grain 
Dealers'  Association  of  South  Dakota.  It  is  presented  to 
show  how  these  cooperative  associations  are  handled. 
The  usual  provision  for  officers  and  their  duties,  the  hold- 
ing of  meetings,  the  keeping  of  records,  and  other  routine 
matters  are  included  also :  — 

ARTICLES  OF  INCORPORATION 

Article  1 

This  corporation  shall  be  known  as  the 

Company,  and  its  place  of  business  and  post-of&ce  address  shall 
be ,  South  Dakota. 

Article  2 

The  object  of  this  company  is  to  own  an  Elevator  and  such 
other  Buildings  as  may  be  necessary,  to  carry  on  the  business  of 
buying,  selling,  storing,  and  dealing  in  all  kinds  of  Grain,  Seeds, 
Coal,  Lumber,  Farm  Machinery  and  general  merchandise.  Live- 
stock and  other  commodities  that  may  properly  belong  to  the 
interests  of  the  stockholders  of  such  company. 

Article  3 
The  capital  stock  of  this  company  shall  be 


Dollars,  divided  into Shares  of  the  par  value  of 

Dollars  each. 

Article  4 

The  officers  of  this  company  shall  be  a  President,  Vice  Presi- 
dent, Secretary,  Treasurer,  and  a  board  of directors, 


Cooperation  133 

three  of  whom  shall  be  the  President,  Vice  President,  and  Sec- 
retary as  above  named  ;  also  a  manager  who  shall  be  selected  and 
hired  by  the  Board  of  Directors.  The  Treasurer  may  be  selected 
outside  the  company,  or  the  Secretary  and  Treasurer  may  be  one 
and  the  same  person. 

Article  5 

Surplus  earnings  may  be  divided  not  to  exceed per 

cent  on  the  paid-up  capital  stock,  and  the  balance  may  be  divided 
among  the  stockholders  according  to  the  amount  of  business 
furnished  the  company,  as  may  be  provided  in  the  by-laws. 

Article  6 

Each  stockholder  shall  be  entitled  to  one  vote  for  each  share 
of  stock  held  by  him ;  except  that  no  stockholder  shall  be  en- 
titled to  more  than votes,  as  provided  for  in  Second 

subdivision  of  Paragraph  7,  Section  1,  Chapter  264,  Session  Laws 
of  1909. 

P.S.  The  above  article  may  be  incorporated  in  the  articles 
of  incorporation  if  a  limit  of  votes  is  desired. 

By-laws 

Any  person  twenty-one  years  old  and  over,  shaU  be  eligible 
to  become  a  stockholder  in  this  association  upon  making  appli- 
cation for  one  or  more  shares  of  stock,  not  to  exceed 

shares,  at  the  par  value  of dollars  each,  under  such  rules 

and  regulations  as  the  Board  of  Directors  may  provide ;  and  that 
such  applicant  agrees  to  conform  to  all  the  rules  and  regulations 
as  provided  for  in  the  by-laws  then  existing,  or  that  hereafter  be 
adopted  ;  and  that  he  will  not  sell  any  such  shares  to  any  person, 
until  he  has  offered  them  for  sale  to  the  company  at  their  par 
value,  and  the  company  has  refused  to  purchase  same. 

All  stock  shall  be  liable  for  indebtedness  to  the  association, 
and  shall  not  be  transferred  while  the  register  holder  thereof 
is  indebted  to  the  association  in  any  manner.  This  section  may 
be  printed  on  the  back  of  all  stock  certificates,  as  a  notice  to 


134  Cooperation  in  Agriculture 

would-be  purchasers  to  acquaint  themselves  with  the  provisions 
or  the  by-laws  before  buying. 

Any  stock  purchased  by  the  a'ssociation  shall  be  sold  by  it 
before  any  new  stock  is  issued,  and  until  sold  shall  be  carried 
on  its  books  as  part  of  the  assets. 

The  Board  may  borrow  money  for  the  purpose  of  conducting 
and  carrying  on  the  business  of  the  association.  They  may 
appoint  an  attorney  for  the  association,  also  such  agents  or  other 
representatives,  and  employ  such  persons  as  may  be  necessary 
to  properly  carry  on  its  business.  AU  such  appointments  shaU 
be  subject  to  the  pleasiu-e  of  the  Board  as  to  the  time  of  employ- 
ment and  compensation. 

The  grain  buyer  or  agent  shall  have  charge  and  management 
of  the  elevator  and  all  lines  of  business  that  may  be  taken  up  by 
the  association  ;  he  shall  make  weekly  or  monthly  reports  to  the 
Secretary  as  the  Board  may  require,  shall  fiurdsh  such  bonds  as 
the  Board  may  require,  and  shall  turn  over  to  his  successor  all 
moneys,  books,  and  other  property  belonging  to  the  association. 
He  shall  receive  such  compensation  as  the  Board  may  provide. 

Any  speculation  on  the  part  of  the  manager  is  forbidden,  such 
as  dealing  in  options,  fm*ther  than  hedging  against  stored  grain 
shipped  out.  And  at  no  time  shall  any  option  be  bought  or  sold 
only  in  case  the  cash  grain  is  actually  represented. 

The  election  of  the  Board  of  Directors  must  be  by  ballot ;  any 
other  business  may  be  transacted  by  an  Aye  and  Nay  vote,  each 
stockholder  being  entitled  to  one  vote  for  each  share  held  by  him ; 
unless  otherwise  provided  in  the  Articles  of  Incorporation, 
proxies  may  be  allowed  upon  a  majority  vote  of  the  members 
present. 

Dividends.  —  The  Board  of  Directors  shall  have  power  to  declare 
dividends  from  the  net  earnings  of  the  association  not  to  exceed 

per  cent  on  the  capital  stock  actually  sold,  provided  that 

no  dividends  shall  be  declared  in  excess  of  the  net  earnings  of 
the  association  after  deducting  all  losses  and  expenses,  and  it 
shall  be  the  duty  of  the  Board  to  carefully  estimate  the  value  of  all 
real  estate  and  other  property  owned  by  the  association,  charg- 
ing any  depreciation  to  be  charged  off  before  declaring  any 


Cooperation  135 

dividends;  and  provided  further:  that  should  there  be  any 
surplus  of  the  net  earnings  after  said  dividends  are  paid  and  the 
amount  of  siirplus  carried  to  account,  the  balance  shall  be  divided 
(pro  rata)  among  the  stockholders  according  to  the  amount  of 
business  each  may  have  furnished  the  company ;  provided, 
however,  that  the  business  of  one  year  shall  not  affect  the  busi- 
ness of  another. 

The  accounts  of  the  different  lines  of  business  handled  by  the 
company  shall  be  kept  separate,  also  the  accounts  of  each  stock- 
holder shall  be  kept  separate. 

The  by-laws  may  be  amended  by  a  two-thirds  vote  of  all 
stock  sold  at  any  annual  meeting,  or  at  any  special  meeting 
called  by  the  Board  for  that  purpose,  after  notice  having  been 
given  as  provided  for  in  these  by-laws. 

COOPERATION   IN   THE  MANUFACTURE   OF  BUTTER 

There  has  been  a  larger  movement  among  the  dairy 
farmers  to  handle  their  business  along  cooperative  lines 
than  in  any  other  branch  of  American  agriculture.  There 
were  nearly  6300  creameries  and  3846  cheese  factories 
in  the  United  States  in  1911.  According  to  the  records 
of  the  Dairy  Division  of  the  United  States  Department  of 
Agriculture,  2120  of  the  creameries,  or  33.6  per  cent,  and 
349  of  the  cheese  factories  were  organized  by  the  farmers 
as  cooperative  institutions.  The  largest  number  of  co- 
operative creameries  are  located  in  the  Central  and  North- 
em-central  states.  In  Minnesota,  there  were  six  hundred 
and  eight  cooperative  creameries  in  1910;  in  Wisconsin, 
three  hundred  and  forty-seven;  in  Iowa,  three  hundred 
and  thirteen;  in  Michigan,  one  hundred  and  one;  in 
Indiana,  seventy-seven ;  in  Illinois,  fifty-five ;  in  New 
York,  one  hundred  and  eighteen ;  in  Pennsylvania,  ninety- 
two  ;  and  fifty-nine  in  Vermont.     Of  the  cooperative  cheese 


136  Cooperation  in  Agriculture 

factories,  two  hundred  and  forty-four  were  in  Wisconsin, 
twenty-four  in  Minnesota,  and  thirty-nine  in  New  York. 

In  former  years,  butter-making  was  a  part  of  the  duties 
of  the  household.  The  milk  was  set  in  pans  in  the  cellar, 
the  cream  was  skimmed  off  and  was  converted  into  butter 
in  hand  churns.  Later  on  when  various  kinds  of  butter- 
making  machinery  had  been  devised,  the  butter  factory 
and  the  modern  creamery  were  successively  organized. 
At  first  the  milk  was  taken  to  the  creamery  by  the  farmers 
or  was  gathered  from  them  by  collectors  in  the  employ 
of  the  creamery.  There  it  was  run  through  a  separator  and 
the  butter-fat  removed,  or  the  cream  alone  was  delivered 
to  the  factory,  where  it  was  made  into  butter,  the  skimmed 
milk  being  returned  to  the  farm  to  use  for  feeding  hogs. 
The  butter  was  usually  sent  to  a  commission  merchant. 
The  modem  creamery  is  generally  a  well-organized  and 
well-equipped  factory  operated  by  well-trained,  skillful 
men.  It  is  no  longer  a  hit-and-miss  operation.  It  re- 
quires a  knowledge  of  chemistry,  bacteriology,  sanitary 
science,  and  the  application  of  this  knowledge  to  the  de- 
tails of  butter-making.  Under  no  other  conditions  can 
a  modem  creamery  succeed. 

A  creamery  should  include  the  produce  of  400  to  600 
cows  to  insure  its  successful  operation  as  a  business  enter- 
prise. It  is  better  still  to  have  a  thousand  cows  registered 
in  its  membership,  because  the  economy  of  operation  and 
the  success  in  the  distribution  of  the  product  increases 
with  the  volume  of  business.  Many  creameries  have 
been  formed  with  fewer  than  400  cows,  but  it  is  an  ex- 
ception to  find  one  of  this  size  that  is  successful. 

A  creamery  is  usually  formed  as  a  stock  corporation 


Cooperation  137 

for  pecuniary  profit  or  it  may  be  formed  as  a  cooperative 
enterprise.  When  organized  by  a  group  of  dairymen,  it 
may  take  either  of  these  forms,  though  most  of  the  farm- 
ers' creameries  in  America  have  been  formed  as  stock 
corporations  with  certain  cooperative  features  included. 
The  country  creameries  are  usually  owned  by  an  individual 
creamery  man  or  by  the  farmers  in  the  community  in 
which  it  is  located.  There  are  also  many  large  creamery 
corporations  formed  to  purchase  cream  and  butter-fat 
from  the  farmers  and  to  distribute  the  product  to  the 
wholesale  and  retail  trade,  the  profits  from  the  finished 
butter  going  to  the  creamery  company  rather  than  to  the 
producer. 

Organization  of  a  Creamery 

In  organizing  a  farmers'  creamery,  the  first  step  is  to 
determine  the  number  of  cows  within  a  few  miles  of  the 
proposed  plant  from  which  the  cream  can  be  obtained. 
When  one-half  of  the  amount  needed  is  pledged  by  the 
farmers,  the  creamery  is  then  to  be  made  a  legal  corpora- 
tion. Shares  of  stock  should  be  sold  to  as  many  farmers 
as  possible  at  $25,  more  or  less,  per  share,  and,  to  provide 
against  the  creamery  falling  into  a  few  hands,  no  one 
farmer  should  be  allowed  to  own  more  than  a  limited  num- 
ber of  shares.  The  creamery  may  be  organized  as  a 
non-stock  corporation  along  the  lines  already  described  for 
corporations  of  this  character.  This  method  is  the  usual 
one  in  the  Danish  and  French  creameries,  the  original 
funds  needed  to  build  a  factory  being  borrowed  from  a 
bank  and  paid  off  in  installments.  The  Danish  system 
of  financing  is  described  by  Fay  ^  as  follows :  — 

1  "  Cooperation  at  Home  and  Abroad,"  pp.  168-169. 


138  Cooperation  in  Agriculture 

"The  original  funds  for  the  equipment  of  the  dairy 
are  borrowed  from  a  private  bank  and  repaid  by  install- 
ments. The  working  capital  is  provided  by  a  premium 
of  (say)  15s.  per  cow  owned,  on  which  no  interest  is  paid. 
When  the  original  loan  is  paid  off,  a  new  loan  is  taken 
out  from  the  bank  at  the  same  rate  of  interest,  and  is 
charged  upon  the  working  expenses  of  the  society,  in- 
cluding both  original  and  new  members.  The  money 
thus  obtained  is  handed  over  to  the  original  members, 
and  then  all  alike  proceed  to  pay  off  the  new  loan;  and 
so  on  through  an  indefinite  series  of  loans  and  repayments. 

"The  object  of  the  device  is  this:  old  members,  who 
had  borne  the  expense  of  the  original  loan,  would  naturally 
not  admit  new  members  to  joint  ownership  in  a  property 
to  which  the  latter  had  contributed  nothing,  while  new 
members  would  not  always  be  prepared  to  pay  down  at 
once  into  the  reserve  fund  a  sum  equal  to  the  individual 
outlay  of  original  members.  However,  a  new  member  is 
at  any  time  admitted,  if  he  is  prepared  to  pay  down,  be- 
sides his  premium  per  cow,  a  subscription  corresponding  to 
the  amount  which,  at  the  time  he  happens  to  join,  is  paid 
off  on  the  debt  of  the  creamery.  The  loans  are  obtained 
at  an  average  rate  of  4  per  cent  from  the  municipal  savings 
banks  or  from  private  provincial  banks. 

"In  France  the  majority  of  the  dairies  are  also  formed 
without  capital  shares.  As  in  Denmark,  the  funds  are 
raised  by  loans  bearing  about  4  per  cent  partly  from  the 
richer  members  of  the  society  and  partly  from  private 
banks.  The  plan  of  making  new  members  pay  entrance  fees 
proportionate  to  the  amount  of  the  loan  already  discharged 
has  apparently  been  found  quite  workable  in  practice." 


Cooperation  139 

As  a  rule,  a  shareholder  should  have  but  one  vote  and 
not  a  vote  for  every  share,  or,  if  there  is  a  wide  difference 
in  the  amount  of  butter-fat  furnished  by  the  members, 
the  voting  power  may  be  made  proportional  to  the  amount 
of  butter-fat  delivered.  The  dividends  should  be  payable 
on  the  amount  of  butter-fat  delivered,  whether  the  cream- 
ery is  formed  as  a  stock  or  non-stock  corporation,  though 
in  the  former  case,  a  dividend  equal  to  the  usual  rate  of 
interest  may  be  paid  on  the  capital  stock  before  the  net 
earnings  are  distributed. 

A  group  of  farmers  who  contemplate  a  creamery  or- 
ganization should  look  carefully  into  these  fundamental 
questions.  There  are  numberless  creamery  promoters 
who  endeavor  to  organize  the  farmers  in  order  to  sell 
them  machinery  or  other  supplies.  As  a  rule,  they  cause 
the  farmers  to  spend  thousands  of  dollars  more  than  is 
necessary  in  starting  an  enterprise  of  this  character,  be- 
sides injuring  the  creamery  movement  in  the  community 
whenever  such  an  enterprise  fails.  Generally  the  farmers 
do  not  look  into  these  fundamental  questions  until  after 
they  have  made  a  serious  mistake,  and  then  they  find 
that  their  association  has  been  formed  in  a  loose  way  or 
along  extravagant  lines.  In  many  of  the  states,  the  Dairy 
Division  of  the  State  Agricultural  College  or  the  Dairy 
Commissioner  will  cooperate  with  the  farmers,  assisting 
them  to  organize  along  lines  that  have  made  the  coopera- 
tive movement  most  successful. 

The  data  following  are  taken  from  a  model  organiza- 
tion agreement  that  is  used  by  the  Dairy  Division  of  the 
United  States  Department  of  Agriculture  in  assisting 
the  dairy  farmers  to  form  a  creamery  or  cheese  factory 
as  a  cooperative  enterprise  :  — 


140 


Cooperation  in  Agriculture 


Organization  Agreement 

We,   the   undersigned   citizens   of County, 

State  of ,  do  hereby  agree  to  form  ourselves 

into  an  Association,  to  be  known  by  the  name  of 


Cooperative  Creamery  Association,  and  we  agree  to  take,  at  the 

rate  of  $ each,  the  number  of  shares  set  opposite  our 

names,  and  fvu-ther  agree,  at  all  times  after  the  commencement 
and  during  any  time  of  operation  of  the  creamery  erected  by 
the  Association,  to  fm-nish  to  said  creamery  all  the  milk  or  cream 
that  we  produce  for  market.     In  case  there  are  not  400  cows 

belonging  to  those  subscribing  for  shares  or  if  less  than  $ 

worth  of  shares  is  subscribed,  this  agreement  shall  not  be 
binding. 


Namk 

Address 

No.  OF 
Shares 

No.  OF 
Milch  Cows 

Articles  of  Agreement  of  the 


Association 


We  whose  names  are  hereto  subscribed,  and  whose  residences 

are  within  the  county  of ,  in  the  State  of , 

do  hereby  associate  ourselves  together  as  a  cooperative  associa- 
tion under  the  laws  of  the  State  of ,  and  have  adopted 

the  following  constitution,  viz. :  — 


Article  1 
The  name  of  the  association  shall  be  the 


Associa- 


tion and  its  place  of  business  shall  be  at  or  near  Section 
in  the  Town  of ,  in  said  County. 


Cooperation  141 

Article  2 

The  object  of  the  association  shall  be  the  manxifacture  of 
butter  or  cheese  or  both  from  whole  milk  and  cream,  at  actual 
cost. 

Article  3 

The  officers  of  the  association  shall  be  a  president,  vice-presi- 
dent, secretary,  treasurer,  and  three  trustees,  who  shall  be  elected 
annually  at  the  regular  annual  meeting  of  the  association  to  be 
held  on  the  first  Monday  in  January  of  each  year,  and  their  terms 
of  office  shall  be  one  year  or  until  their  successors  shall  have  been 
duly  elected  and  quaUfied. 

Article  4 

The  duties  of  the  respective  officers  shall  be  as  follows :  — 

The  president  shall  preside  at  aU  meetings  of  the  association, 
and  he  shall  have  power  to  call  special  meetings  of  the  associa- 
tion whenever  in  his  judgment  the  business  of  the  association 
shall  require  it. 

The  vice  president  shaU  perform  the  duties  of  the  president 
when  the  latter  is  absent  or  otherwise  unable  to  attend  to  them. 

The  secretary  shall  keep  a  record  of  aU  meetings  of  the  associ- 
ation and  shall  send  or  «ause  to  be  sent  a  notice  of  the  annual 
meeting  to  each  shareholder  of  the  association  at  least  ten  days 
before  such  meeting.  He  shall  also  make  and  sign  all  orders 
upon  the  treasurer.  He  shall  compute  the  amount  of  milk  and 
cream  received,  the  amount  of  product  sold  and  all  moneys  re- 
ceived therefor,  and  after  deducting  from  the  total  receipts  the 
I)ercentage  herein  provided  for  as  sinking  fund,  and  also  the  run- 
ning expenses,  on  the  20th  day  of  each  month,  shall  divide  the 
remainder  for  the  preceding  month  among  the  members  and 
patrons  of  the  association,  proportionately  to  the  number  of 
pounds  of  butter-fat  furnished  by  each. 

The  treasurer  shall  receive  and  receipt  for  all  moneys  belong- 
ing to  the  association  and  pay  out  the  same  only  ujKin  order  which 


142  Cooperation  in  Agriculture 

shall  be  signed  by  the  secretary;  he  shall  give  bond  in  such 
amount  as  the  association  shall  provide. 

The  president,  vice  president,  secretary,  and  treasurer  and 
three  trustees  shall  constitute  a  board  of  directors  whose  duties 
shall  be  to  audit  and  allow  all  just  claims  against  the  association. 

The  board  of  directors  shall  cause  the  secretary  to  make  in 
writing  a  report  of  the  annual  meeting  of  the  association,  setting 
forth  in  detail  the  gross  amount  of  milk  and  cream  receipts,  the 
money  receipts  and  disbursements,  together  with  a  compre- 
hensive statement  of  the  financial  standing  of  the  organization 
and  such  other  information  as  may  be  necessary  for  the  share- 
holders and  patrons  to  understand  the  business  condition  of  the 
organization  and  he  shall  cause  such  a  statement  to  be  printed 
on  the  notice  of  the  annual  meeting. 


Abticle  5 

The  several  members  shall  f xuriish  all  the  milk,  or  cream  from 
the  same,  from  all  the  cows  subscribed  by  each  member,  all 
milk  and  cream  to  be  fresh,  unadulterated,  and  pure.  Patrons 
of  the  association,  not  members,  may  by  agreement  with  the 
board  of  trustees,  furnish  such  amounts  of  milk  and  cream  as  may 
be  agreed  upon.  The  association  shall  receive  all  such  milk  and 
cream  so  furnished,  manufacture  the  same  into  butter  or  cheese 
or  both,  sell  the  product,  and  from  the  moneys  so  received  deduct 
such  percentage  thereof  (or  such  a  number  of  cents  per  one  hun- 
dred pounds  of  milk,  or  a  fraction  of  one  cent  per  pound  of  butter- 
fat)  as  shall  be  agreed  upon  by  the  association  in  the  by-laws  or 
otherwise,  and  also  deduct  the  running  expenses  of  the  creamery, 
the  remainder  to  be  distributed  as  provided  in  Article  4. 


Article  6 

Each  member  shall  be  entitled  to  one  vote  at  any  meeting  of 
the  association.  New  members  may  be  admitted  as  provided 
in  the  by-laws. 


Cooperation  143 

Article  7 

The  first  officers  and  board  of  trustees  shall  be  as  follows :  — 

President, Vice  President, 

Secretary, Treasurer, 

Trustee, Trustee, 

Trustee. 


Article  8 

The  constitution  may  be  amended  at  any  annual  meeting,  or 
at  any  special  meeting  called  for  that  purpose  provided  that  two- 
thirds  of  all  members  present  vote  in  favor  of  such  change ;  and 
provided  further  that  at  least  one  month's  notice  of  such  pro- 
posed amendment  shall  have  been  given  in  such  manner  as  may 
be  provided  for  in  the  by-laws  or  otherwise  by  the  association. 

Article  9 

Shares  may  be  transferred  from  one  person  to  another  only  by 
the  order  of  the  board  of  directors  to  the  secretary  to  have  such 
shares  transferred  on  the  books  of  the  association,  and  no  person 
shall  at  one  time  hold  more  than  four  shares.  Any  member 
selling  his  milk  or  cream  at  any  place  other  than  the  creamery  of 
this  association  shall  forfeit  his  stock  and  all  interest  in  the 
creamery. 

By-laws  op  the Association 

1 

The  treasurer  shall  give  bond  in  the  sum  of   dollars, 

the  bond  to  be  approved  by  the  board  of  directors. 

2 
One-half  (^)  cent  per  pound  of  butter-fat  received  at  the 
creamery  shall  be  reserved  to  form  a  sinking  fund. 

3 

Milk  or  cream  shall  be  deUvered  to  the  creamery  as  often  as 
possible  or  according  to  agreement  between  the  operator  and 
patrons. 


144  Cooperation  in  Agriculture 

4 

All  milk  and  cream  shall  be  sweet  and  in  good  condition ;  if 
any  be  found  otherwise,  the  operator  may  condemn  the  same. 
The  operator  shall  take  for  test  a  sample  of  milk  or  cream  fur- 
nished by  each  member  or  patron  each  day. 

5 

Notice  of  any  proposed  amendment  to  the  constitution  shall 
be  in  writing  or  printing  and  shall  be  kept  posted  prominently  in 
the  creamery  building  and  also  on  the  walls  of  the  delivery  room 
for  the  reception  of  milk  and  cream,  for  at  least  ten  days  before 
such  amendment  is  voted  on. 

The  Status  of  the  American  Creamery 

Taken  as  a  whole,  the  cooperative  creamery  is  one  of 
the  most  loosely  organized  farmers'  movements  in  America. 
The  dairy  farmers  have  not  understood  the  fundamental 
principles  underlying  a  cooperative  movement.  A  large 
proportion  of  the  creameries  have,  therefore,  been  con- 
ducted along  lines  that  do  not  hold  the  continued  confi- 
dence of  the  members.  The  dairy  farmers  as  a  class  are 
not  skilled  in  business  methods.  The  dairy  industry,  ex- 
cept in  a  few  states,  is  not  a  special,  highly  developed  type 
of  agriculture  like  fruit-growing  and  other  branches  of  hor- 
ticulture in  the  irrigated  Western  states.  The  dairy  may 
be  an  incidental  feature  of  the  farm.  The  average  dairy 
farmer  is  therefore  not  prepared  to  inaugurate  and  sus- 
tain a  highly  organized  system  of  cooperative  butter- 
making,  or  the  distribution  and  sale  of  the  manufactured 
product.  In  many  sections,  the  farmers'  creameries  have 
not  been  formed  as  a  result  of  a  necessity  that  was  felt  by 
the  dairymen.  A  large  proportion  have  been  formed 
through  the  activity  of  professional  creamery  promoters 


Cooperation  145 

who  represent  the  manufacturers  of  creamery  machinery 
or  of  other  factory  suppHes.  Skillful  agents  have  been 
sent  into  every  dairy  section  to  convince  the  dairymen 
that  an  association  creamery  will  improve  their  agricul- 
tural and  financial  condition.  The  agent  looks  after  the 
incorporation  of  the  association,  he  assists  in  the  prelimi- 
nary organization,  in  the  sale  of  stock,  and  in  the  fina^icing 
of  the  association.  In  the  end,  he  sells  the  association 
the  machinery  and  supplies,  which  may  be  inferior  to 
other  kinds  of  machinery,  at  a  much  higher  price  than  is 
justified  and  usually  under  conditions  that  place  the  asso- 
ciation under  the  financial  control  of  the  agent's  principal. 
Hundreds  of  farmers'  creameries  have  been  formed  in 
this  way  and  as  a  result  many  have  failed.  It  is  a  funda- 
mental principle  of  cooperation  in  agriculture  that  under 
no  circumstances  should  a  farmers'  cooperative  associa- 
tion place  itself  under  obligation,  either  financial  or  other- 
wise, to  a  firm  from  which  it  may  purchase  supplies  or 
to  agencies  which  it  may  use  in  the  distribution  and  sale 
of  its  products.  Whenever  a  farmers'  organization  is 
placed  in  this  position,  it  loses  its  industrial  independence 
and  is  prevented  from  developing  along  lines  that  insure 
its  success  as  a  business  institution. 

The  most  serious  weakness  in  the  cooperative  creamery 
movement  is  the  fact  that  each  creamery  usually  acts  as 
a  unit  in  the  manufacture  of  the  butter,  in  the  purchase 
of  supplies,  in  the  development  of  markets,  and  in  the 
distribution  and  sale  of  its  products.  The  average  cooper- 
ative creamery  is  too  small  a  business  unit  to  handle  these 
questions  successfully  in  the  face  of  the  competition  which 
each  association  has  to  meet.  A  small  creamery  cannot 
h 


146  Cooperation  in  Agriculture 

afford  to  employ  the  best  expert  butter-makers,  nor  can 
it  develop  a  highly  organized  system  of  business  manage- 
ment. As  a  result,  the  technical  details  of  butter-making 
are  likely  to  fall  below  the  standards  of  a  larger  factory, 
the  greatest  economies  in  the  purchase  of  supplies  or  in 
the  manufacture  of  butter  cannot  be  inaugurated,  and  no 
comprehensive  system  of  distribution  and  sale  can  be 
developed.  The  average  cooperative  creamery  there- 
fore manufactures  its  product  at  a  comparatively  high 
unit  cost.  The  quality  of  the  butter,  while  comparatively 
good,  is  below  the  standard  of  the  quality  of  the  raw  cream. 
The  creamery  consigns  the  butter  to  a  commission  firm  or 
other  agent,  thereby  turning  over  the  sale  of  the  product  to 
the  usual  selling  agencies,  without  being  powerful  enough 
to  exert  an  influence  on  the  system  of  marketing. 

The  Centralizer  Creameries 

The  strongest  competitors  of  the  cooperative  creamery 
are  the  centralizer  creamery  corporations.  These  cor- 
porations are  formed  to  purchase  the  butter-fat  from  the 
dairymen,  to  distribute  the  butter  to  the  trade,  and  to 
pay  the  profits  from  the  manufacture  and  sale  of  the  butter 
in  the  form  of  dividends  to  the  stockholders.  The  cen- 
traUzers  establish  a  number  of  skimming  stations  where 
the  butter-fat  is  separated  from  the  milk.  The  dairy- 
man is  paid  for  the  butter-fat  when  it  is  delivered  to  the 
station,  or  at  the  end  of  the  month,  and  his  connection 
with  the  butter-making  business  ends  at  that  point.  The 
cream  is  shipped  from  the  skimming  stations  on  fast 
trains,  usually  though  not  always  under  refrigeration,  to 
the  central  butter  factory,  where  it  is  given  uniform  treat- 


Cooperation  147 

ment  and  manufactured  into  butter.  The  skimming 
stations  may  be  located  from  five  hundred  to  seven  hun- 
dred and  fifty  miles  from  the  central  butter  factory;  a 
corporation  in  Topeka,  Kansas,  for  example,  assembling 
the  butter-fat  from  southern  Colorado,  Oklahoma,  north- 
ern Texas,  and  from  Kansas.  The  centralizers  sell  the 
butter  to  the  jobbers  and  retailers  direct  under  a  compre- 
hensive marketing  system.  In  some  cities,  they  deliver 
the  butter  from  the  railroad  to  the  retail  dealers  in  their 
own  wagons. 

The  centralizer  creameries  are  highly  developed  busi- 
ness institutions.  Some  of  them  manufacture  100,000 
pounds  of  butter  daily  and  turn  out  from  fifteen  to  twenty 
thousand  tons  annually.  The  managers  are  experienced 
business  men  and  are  sometimes  paid  five  thousand  dol- 
lars a  year.  They  can  employ  well-trained  butter-makers 
and  can  apply  the  best  butter-making  science  to  the  equip- 
ment of  their  factories.  The  factory  equipment  and  the 
supplies  are  purchased  on  a  large  scale,  and  the  volume  of 
business  is  large  enough  to  develop  a  well-organized  mar- 
keting system.  Compared  with  the  average  cooperative 
creamery,  the  centralizer  creameries  are  far  in  advance 
in  the  science  and  art  of  butter-making  and  in  the  organi- 
zation as  a  business  enterprise.  From  the  standpoint 
of  the  product  itself  they  are  at  a  distinct  disadvantage, 
because  the  grade  of  cream  that  reaches  the  central  fac- 
tory from  the  skimming  stations  is  below  the  quality  of 
that  delivered  to  the  farmers'  creamery.  It  reaches  the 
central  factory  in  all  kinds  of  conditions,  and  the  factory 
has  to  depend  on  the  technical  skill  of  the  butter -maker 
to  renovate  and  blend  the  different  lots  of  butter-fat  and 


148  Cooperation  in  Agriculture 

to  turn  out  a  product  of  good  average  grade.  The  co^ 
operative  creamery  has  the  highest  quaUty  of  butter-fat 
to  work  with  and  may  spoil  it  through  unskillful  manipula- 
tion. The  centralizer  employs  the  highest  class  of  butter- 
makers  and  depends  on  them  to  overcome  the  disadvan- 
tage of  a  comparatively  lower  grade  of  raw  material. 

A  Business  System  for  Cooperative  Creameries 

If  the  cooperative  creamery  is  to  hold  its  own  in  the 
future,  it  will  need  to  improve  business  methods  in  the 
organization  of  the  creameries,  in  the  equipment  of  the 
factories,  in  the  economies  in  manufacture,  in  the  purchase 
of  supplies,  and  in  the  development  of  a  system  of  dis- 
tribution and  sale  of  the  butter.  In  no  other  way  can 
it  exist  permanently  as  an  important  factor  in  the  develop- 
ment of  the  American  dairy  industry.  There  are  many 
local  creameries  in  the  dairy  states  that  can  always  meet 
competition  with  the  superior  grade  of  butter  that  they 
manufacture,  but,  as  a  national  movement,  the  farmers' 
creamery  will  need  to  readjust  the  methods  of  handling 
the  business  side  of  the  dairy  industry,  or  else  the  handling 
of  the  dairy  products  will  pass  into  the  control  of  the  cor- 
porations that  are  formed  primarily  to  make  a  profit 
on  the  dairymen's  product  rather  than  to  develop  a  vigor- 
ous, healthy  dairy  industry. 

The  average  cooperative  creamery  cannot  reorganize 
along  these  lines.  The  volume  of  business  transacted  by 
each  is  too  small  to  warrant  extensive  reorganization. 
These  creameries  are  in  a  similar  condition  to  the  apple- 
growers'  associations  of  the  Northwestern  states.  There 
are  many  of  these  small  associations,  each  of  which  acts 


Cooperation  149 

as  a  unit  in  handling  a  beautiful  natural  product.  The 
apple  business  is  increasing  by  leaps  and  bounds,  and  when 
the  volume  of  business  reaches  the  point  where  the  market 
cannot  take  a  larger  supply  of  high-priced  fruit  under  the 
marketing  conditions  as  they  exist  in  the  Northwest,  the 
local  association  will  fail  to  protect  the  capital  which  is 
invested  in  the  apple-growing  business.  The  cooperative 
creameries,  like  the  Northwestern  apple-growers'  asso- 
ciations, need  to  create  a  number  of  central  cooperative 
agencies,  one,  for  example,  for  each  state  or  other  large 
geographical  division,  to  act  for  them  at  cost  in  purchas- 
ing supplies  and  in  the  distribution  and  sale  of  their  prod- 
ucts. In  no  other  way  can  the  situation  in  either  case  be 
met  effectively.  These  central  agencies,  like  the  California 
Fruit-growers'  Exchange,  will  supply  the  facilities  for 
marketing  the  product  of  the  creameries  or  associations 
which  comprise  it ;  they  will  look  after  the  general  ques- 
tions aside  from  marketing  that  affect  the  upbuilding 
of  the  industry ;  they  will  bring  about  uniformity  in  the 
equipment  of  factories  and  in  the  manufacturing  processes. 
They  may  act  as  an  agent,  or  may  form  subsidiary  cor- 
porations, to  purchase  factory  supplies  and  the  general 
supplies  used  on  the  dairy  farms,  and  they  can  develop 
a  comprehensive  system  of  marketing  by  advertising  and 
by  the  employment  of  exclusive  agents  in  the  principal 
markets.  In  this  way,  the  cooperative  creamery  can  be 
organized  more  effectively  than  a  large  creamery  cor- 
poration, and  it  can  more  than  meet  competition  with 
the  superior  butter  that  will  be  made  in  its  factories. 
Under  this  system  the  local  creamery  is  an  association 
that  manufactures  the  butter  and  prepares  it  for  ship- 


150  Cooperation  in  Agriculture 

ment.  The  associations  of  a  community  or  of  a  state  feder- 
ate and  form  an  agency  which  either  markets  the  butter 
for  the  local  creameries  under  local  brands  or  furnishes 
the  marketing  facilities  which  the  local  associations  use 
in  marketing  their  own  product.  In  the  primary  dairy 
states,  the  creameries  in  a  county  or  a  community  may 
form  a  local  exchange  to  look  after  the  problems  that 
affect  them  all  alike,  and  these  local  exchanges,  like  the 
district  exchanges  in  the  citrus  industry  in  California, 
may  form  a  larger  central  agency  to  represent  them  in 
the  distribution  and  marketing  of  the  butter. 

In  brief,  then,  the  cooperative  creamery  movement 
starts  with  the  dairyman  as  the  unit;  the  dairymen  of 
a  community  owning  four  hundred  or  more  cows  form  an 
association,  on  cooperative  principles,  build  a  factory 
in  which  the  cream  of  the  members  is  assembled  under 
rules  and  regulations  established  by  the  association,  and 
is  there  made  into  butter  and  prepared  for  shipment. 
These  local  associations  form  a  district  agency  on  coopera- 
tive principles  which  looks  after  the  local  questions  that 
affect  them  all  alike  and  which  may  act  as  a  marketing 
agency  for  them ;  or,  if  the  plan  is  more  comprehensive, 
the  district  agencies  may  form  a  central  exchange  which 
acts  as  a  brokerage  agent  for  the  district  organizations, 
operating  at  actual  cost  in  furnishing  the  marketing  facili- 
ties, in  the  development  of  markets,  in  the  handling  of 
the  general  public  policy  questions  that  affect  all  of 
the  associations  and  district  agencies,  and  in  providing 
a  system  which  operates  towards  the  general  upbuild- 
ing of  the  dairy  industry.  It  can  employ  traveling  ex- 
perts to  assist  the  local  butter-makers  and  the  association 


Cooperation  161 

managers,  and  help  in  the  formation  of  new  associations. 
It  is  this  system  that  has  given  Denmark  the  primacy 
among  the  dairy  countries  of  the  world.  In  Denmark, 
there  are  at  least  nine  selling  federations  that  represent 
the  dairy  associations  in  the  sale  of  their  products. 

It  is  essential  to  the  American  dairy  interests  that  the 
cooperative  creamery  system  be  maintained  and  improved. 
In  no  other  way  can  the  dairy  farmer  insure  the  protection 
of  his  interests.  The  cooperative  creamery  is  formed  to 
handle  the  product  of  the  members  so  that  the  producer 
shall  receive  the  maximum  return  for  his  product  after 
the  operating  costs  have  been  deducted,  and  to  improve 
the  dairy  industry  in  every  other  way.  The  centralizer 
corporation,  on  the  other  hand,  is  formed  to  make  money 
out  of  the  product  of  the  dairymen.  It  is  also  interested 
in  the  development  of  the  industry  as  a  means  of  making 
larger  profits  for  the  stockholders.  The  two  systems  aim 
in  the  same  direction,  but  for  entirely  different  reasons. 
The  former  is  interested  in  making  the  dairy  industry 
better  in  order  to  make  farming  a  more  profitable  and 
desirable  vocation ;  the  latter  is  interested  in  the  develop- 
ment of  country  life  only  in  so  far  as  it  is  a  means  of  paying 
larger  dividends  on  the  capital  stock  invested  in  the  cream- 
ery corporation.  As  long  as  there  is  competition,  the 
financial  status  of  the  farmer  may  improve  under  either 
system.  But  the  aim  of  the  large  corporations  that  handle 
the  common  articles  of  consumption  is  to  become  monop- 
olistic by  suppressing  competition,  and  when  competi- 
tion is  stifled,  to  dictate  to  the  producer  the  conditions 
under  which  he  shall  sell  his  products,  the  price  which  he 
shall  receive,  and  the  price  which  the  consumer  shall  pay. 


152  Cooperation  in  Agriculture 

The  speculators  in  California  attempted  to  eliminate 
competition  in  the  early  stages  of  the  citrus  industry; 
the  hne-elevator  companies,  assisted  by  the  railroads, 
accomplished  this  end  in  the  grain  business ;  the  apple  and 
peach  buyers  by  mutual  agreement  have  frequently  done 
the  same  thing  in  these  industries.  Unless  the  coopera- 
tive creamery  associations  federate  into  a  more  eflBcient 
business  organization,  the  dairy  Industry  will  gradually 
pass  into  the  hands  of  the  corporations  that  are  formed 
to  make  the  largest  possible  profit  out  of  the  products  of 
the  dairyman. 

A  Cooperative  Dairy  Federation  in  Minnesota 

An  effort  is  being  made  in  Minnesota  through  the  Minne- 
sota Cooperative  Dairies  Association  to  distribute  and 
sell  the  product  of  creameries  on  the  cooperative  plan. 
A  corporation  was  formed  in  1907  by  seven  local  coopera- 
tive creamery  associations.  The  association  was  organized 
with  a  capital  stock  of  $12,500,  divided  into  five  hundred 
shares.  The  stock  cannot  be  sold  by  a  member  without 
first  giving  the  association  the  first  option  to  purchase, 
and  a  stockholder  has  but  one  vote  at  any  stockholders' 
meeting.  The  purpose  of  the  association  is  to  receive, 
sell,  and  otherwise  dispose  of  all  products  of  any  individual 
manufacturing  or  agricultural  cooperative  association.  It 
charges  five  per  cent  on  the  gross  sales  and  from  the 
revenues  derived  in  this  manner  each  month  pays  the 
cost  of  operation,  charging  to  each  member  his  pro  rata 
share  of  the  cost.  The  association  retains  one  mill  per 
pound  on  each  pound  of  butter  sold  to  be  held  as  a  re- 
serve or  for  other  purposes,  and  prorates  the  balance 


Cooperation  153 

from  the  five  per  cent  to  each  shipper,  when  such  a  bal- 
ance exists. 

The  association  has  appointed  agents  who  were  formerly 
in  the  dairy  business  in  New  York,  Philadelphia,  and  Chi- 
cago, these  agents  receiving  a  certain  proportion  of  the 
selling  charges  deducted  by  the  central  association.  The 
business  of  this  association  is  being  gradually  enlarged. 

The  Creamery  as  a  Center  for  Rural  Improvement 

The  creamery  is  the  natural  center  around  which  several 
cooperative  movements  may  be  organized.  The  cow- 
testing  and  the  cattle-breeders'  organizations  may  be  asso- 
ciated here.  It  may  be  the  center  for  a  number  of  other 
cooperative  activities  such  as  a  bacon  association,  an 
egg-distribution  association,  and  an  organization  for  the 
purchase  of  farm  supplies.  The  agents  that  are  used  to 
market  the  butter  may  be  used  to  market  the  eggs,  and 
a  cold-storage  plant  in  conjunction  with  the  creamery 
may  be  utilized  as  the  centralizing  station  for  the  eggs  of 
the  community  while  preparing  them  for  shipment. 

COOPERATION    IN    THE    DISTRIBUTION    AND     SALE    OF    MILK 

The  cooperative  method  has  been  applied  by  the  dairy- 
men to  the  handling  and  distribution  of  milk  in  some  parts 
of  the  United  States,  but  not  to  the  extent  that  it  has  been 
used  by  the  producers  of  butter  and  cheese.  In  most  of 
the  large  cities  the  milk  supply  is  controlled  by  a  few  cor- 
porations, by  associations  of  dealers,  and  by  small  inde- 
pendent dealers.  In  New  York  State,  for  example,  the 
largest  dealer  in  milk  is  the  Borden's  Condensed  Milk 
Company,  which  is  closely  identified  with  the   Standard 


154  Cooperation  in  Agriculture 

Oil  Company.  They  have  strict  and  often  arbitrary 
rules  to  which  all  farmers  who  sell  to  them  must  conform. 
For  example,  the  Bordens  at  one  time  would  not  buy  milk 
from  Holstein  herds,  nor  could  farmers  feed  ensilage  to 
the  cows.  These  large  corporations  generally  erect  as- 
sembling stations  in  the  country,  where  the  dairymen 
deliver  the  milk  in  cans  and  where  they  are  paid  for  it 
at  a  rate  per  hundred  pounds.  The  milk  is  there  mixed, 
cooled,  and  bottled.  It  may  also  be  clarified  and  pas- 
teurized. It  is  then  packed  in  ice  and  shipped  in  milk 
cars  under  refrigeration,  if  the  railroad  will  provide  it,  to 
the  city,  where  it  is  received  and  distributed  to  the  con- 
sumers in  the  wagons  of  the  corporation.  A  big  fight 
over  the  furnishing  of  refrigeration  was  waged  by  the  milk 
shippers  in  1911  with  the  Philadelphia  and  Reading 
Railway.  The  assembling  stations  are  also  equipped  with 
cream  separators  and  with  butter-making  machinery  to 
be  used  when  there  is  a  surplus  of  milk.  These  large 
corporations  may  own  a  number  of  dairy  farms,  where  a 
portion  of  their  milk  supply  is  produced.  These  farms 
are  often  run  as  demonstration  farms.  The  most  ap- 
proved stock  bams  are  erected,  silos  are  built,  the  herd 
is  wisely  managed,  and  a  crop  rotation  system  is  adopted 
that  is  designed  to  influence  the  agricultural  practices  of 
the  community  along  progressive  dairy  farm  lines.  The 
small  dealers  usually  have  no  bottUng  stations  in  the 
country,  but  receive  the  milk  in  the  city  in  cans.  They 
take  it  to  their  business  places,  where  it  may  be  bottled 
or  peddled  from  the  cans  to  the  consumer,  though  this 
latter  practice  is  prohibited  under  the  laws  and  regulations 
of  many  of  the  cities. 


Cooperation  155 

When  there  is  actual  competition  among  the  purchas- 
ing agencies,  the  dairyman  may  receive  a  fair  price  for 
the  milk.  In  practice,  however,  the  producer  is  almost 
wholly  at  the  mercy  of  the  milk  dealers,  who  become  suf- 
ficiently powerful  to  dictate  the  price  which  shall  be  paid 
to  the  producer  as  well  as  the  price  which  the  consumer 
shall  pay.  In  some  of  the  cities,  the  milk  dealers  have 
formed  combinations  which  have  been  shown  to  operate 
as  a  restraint  of  trade  and  as  a  monopoly  in  the  milk 
traffic  of  the  community.  Neither  the  individual  pro- 
ducer nor  the  individual  consumer  can  protect  himself 
against  a  combination  of  this  character.  In  New  York 
City,  for  example,  the  dealers  who  control  the  milk  supply 
have  been  able  to  force  the  price  of  milk  which  the  pro- 
ducers were  paid  down  to  or  even  below  the  cost  of  pro- 
duction. They  have  also  from  time  to  time  through 
mutual  agreement  simultaneously  raised  the  price  of 
milk  to  the  consumer  and  have  coerced  the  independent 
dealers  by  selling  milk  to  their  customers  at  a  lower  price 
than  the  independent  dealers  received  for  the  milk. 
Through  the  evolution  of  the  milk-distributing  business, 
the  city  milk  dealers  have  acquired  a  position  of  virtual 
monopoly.  This  condition  has  in  the  past  been  so  in- 
tolerable that  many  producers  have  abandoned  the  pro- 
duction of  milk,  and  the  state  has  found  it  necessary  to 
bring  action  under  the  anti-monopoly  laws  against  the 
middlemen  to  protect  both  the  producer  and  the  consumer 
alike  against  their  unreasonable  abuses.  In  the  face  of 
this  condition,  whereby  competition  has  been  eliminated 
among  the  milk  dealers,  there  are  two  ways  in  which  the 
interests  of  the  public  may  be  protected.     The  first  is 


166  Cooperation  in  Agriculture 

the  regulation  of  the  practices  of  these  middlemen  by  the 
state,  whereby  the  commonwealth  protects  the  public 
against  monopolistic  mischief  and  says  that  the  common 
necessities  of  life  shall  be  furnished  without  discrimination 
and  at  a  reasonable  compensation.  The  second  is  through 
the  state  and  municipal  ownership  of  the  facilities  of 
distributing  the  necessities  of  life,  a  method  that  is  being 
tried  experimentally  and  which,  on  account  of  the  greed 
of  the  middlemen  when  unrestrained  and  the  partial 
failure  of  state  regulation  up  to  the  present  time,  is  grow- 
ing in  popular  favor  in  the  United  States. 

The  Organization  of  Milk  Producers 

The  producers  of  milk,  however,  do  not  need  to  invoke 
the  law  as  the  only  means  of  protecting  themselves  against 
the  abuses  of  the  middlemen.  They  have  it  in  their 
own  hands  to  meet  these  conditions  and  to  protect  their 
own  interests  to  a  large  extent  by  conducting  their  busi- 
ness through  cooperative  organizations.  Neither  should 
the  consumers  depend  wholly  on  the  state  to  protect 
them  against  the  greed  of  the  middlemen.  They,  also, 
have  it  in  their  hands  to  organize  cooperatively  and  thereby 
safeguard  their  interests  in  their  dealings  either  with  the 
middlemen  or  with  the  organizations  of  producers.  The 
state  and  the  municipalities  may  enact  legislation  that 
will  tend  to  prevent  monopoly  and  the  restraint  of  trade 
and  to  protect  the  public  against  the  abuses  of  organiza- 
tion, but  neither  the  producers  nor  the  consumers  of  the 
United  States  should  depend  on  the  law  to  protect  them 
against  abuses  which  they  can  at  least  partially  correct 
by  conducting  their  business  operations  along  legitimate 


Cooperation  157 

organization  lines.  Unless  the  producers"  and  consumers 
apply  such  remedies  as  lie  in  their  hands,  the  abuses  of 
unregulated  capital  will  lead  to  the  state  and  municipal 
ownership  of  public  and  semi-public  utilities  and  in  the 
end  to  universal  socialism.  The  plan  of  organization  is 
simple.  The  milk-producers  of  the  country  should  form 
a  large  number  of  local  cooperative  associations  as  the 
citrus  fruit-growers  of  California  have  done.  These  asso- 
ciations may  be  formed  independently,  or  they  may  be 
organized  around  local  associations  which  are  already  in 
existence,  such  as  the  grange.  These  associations  should 
build  stations  where  the  milk  of  the  members  will  be  as- 
sembled and  prepared  for  shipment  in  accordance  with 
the  most  advanced  sanitary  principles  of  milk  handling. 
These  local  associations  should  not  attempt  to  distribute 
or  sell  the  milk  except  in  small  places  where  the  volume 
of  business  is  not  too  large  for  an  association  to  act  as  a 
distributing  agent.  The  associations  of  a  county  or  a 
community  should  then  federate  and  form  a  cooperative 
corporation  to  act  as  an  agent  for  them  in  handling  their 
common  business  problems,  and  these  district  federations 
may  then  form  a  larger  federation,  incorporated  on  co- 
operative lines  which  will  furnish  the  facilities  to  be  used 
by  the  division  federations  in  the  distribution  and  market- 
ing of  the  milk.  The  ultimate  responsibility  for  determin- 
ing the  price  for  which  the  milk  shall  be  sold  to  the 
consumer  should  rest  with  the  producers  through  their 
local  association,  and  the  freest  competition  should  be 
preserved  among  them.  The  central  organization  or  ex- 
change is  the  medium  through  which  information  concern- 
ing the  markets  passes  to  the  district  federations  and 


158  Cooperation  in  Agriculture 

through  them  to  the  local  associations.  It  furnishes  the 
agents  and  wagons  for  distributing  the  milk  to  the  con- 
sumers in  the  towns  and  cities,  collects  the  money  for 
the  milk  and  sends  it  to  the  district  federations,  maintains 
correct  relations  to  the  municipal  health  laws,  protects 
the  associations  against  htigation,  looks  after  traffic 
matters  and  public  policy  questions.  It  may  also  act 
as  a  purchasing  agent  in  securing  the  supplies  used  by 
the  local  associations  and  may  employ  traveling  experts 
who  will  assist  the  local  associations  and  the  district  fed- 
erations in  the  development  of  their  respective  businesses 
along  the  most  desirable  agricultural  and  organization 
lines.  All  of  the  operations  of  the  local  associations,  the 
district  federations,  and  the  central  exchange  should  be 
exclusively  under  the  control  of  the  producers  of  the  milk, 
and  each  of  these  agencies  should  be  conducted  at  actual 
cost,  the  entire  profit  going  to  the  producers.  If  the 
producers  do  not  care  to  undertake  to  distribute  the  milk 
to  the  consumers,  a  similar  organization  is  just  as  desirable 
in  protecting  the  producers  in  their  dealings  with  the 
established  agencies  of  distribution.  Without  such  a 
united  effort,  the  individual  farmer  is  wholly  at  the  mercy 
of  those  who  are  organized  to  make  an  unreasonable 
profit  by  distributing  the  products  of  the  farm  to  the  con- 
sumer In  the  towns  and  cities. 

In  several  cities,  especially  in  the  East,  the  consumers 
have  been  supplied  with  milk  furnished  by  cooperative 
associations  of  producers.  There  is  such  an  organization 
in  northwestern  Pennsylvania,  known  as  the  Erie  County 
Milk  Association.  It  is  formed  by  dairymen  in  Erie 
County  to  distribute  milk  and  cream  in  the  city  of  Erie 


Cooperation  159 

at  the  lowest  possible  cost  to  the  producers.  The  milk 
is  collected  from  the  farmers  by  association  wagon  and 
is  delivered  to  a  central  station  in  Erie  where  it  is  treated 
to  remove  all  foreign  matter,  then  remixed,  standardized 
to  about  four  per  cent  of  butter-fat,  bottled,  pasteurized, 
and  distributed  to  the  consumers  in  wagons  belonging  to 
the  association.  The  association  also  manufactures  ice 
cream  and  has  a  small  creamery  in  which  to  utilize  the 
surplus  milk.  Formerly,  the  milk  was  distributed  in  Erie 
by  the  individual  dairymen  at  an  unnecessary  expense  to 
each  one,  and,  therefore,  either  at  a  lower  net  profit  to  the 
producer  or  a  higher  cost  to  the  consumer.  This  asso- 
ciation is  formed  as  a  stock  company.  The  shares  of 
stock  are  sold  at  fifty  dollars  each.  The  milk  is  paid  for 
at  the  rate  of  three  and  a  quarter  to  three  and  three- 
quarters  cents  per  quart  with  a  minimum  standard  of 
three  and  one-half  per  cent  of  fat.  It  pays  fifty-five  cents 
a  gallon  for  twenty  per  cent  cream  and  one  dollar  and  ten 
cents  per  gallon  for  forty  per  cent  cream.  The  surplus 
profits  are  prorated  to  the  producers  on  the  amount  of 
stock  held,  but  the  amount  of  stock  issued  to  each  mem- 
ber is  proportional  to  the  amount  of  milk  delivered. 

The  New  York  Dairymen's  League 

The  New  York  Dairymen's  League  is  a  corporation 
formed  by  the  producers  of  milk  who  supply  the  city  of 
New  York,  where  fifty  thousand  cans  of  milk  are  consumed 
daily,  to  act  for  them  in  marketing  their  milk.  The  stock- 
holders of  the  League  pay  twenty-five  cents  per  cow  for 
the  stock,  which  is  issued  at  the  rate  of  two  dollars  and 
fifty  cents  per  share.     The  company  reserves  the  right 


160  Cooperation  in  Agriculture 

to  purchase  the  stock  of  any  stockholder  who  desires  to 
sell. 

The  League,  which  is  just  organizing,  is  planned  to  act 
as  an  agency  through  which  the  milk  producers  can  act 
in  the  protection  and  upbuilding  of  the  industry.  It  is 
not  a  milk-distributing  agency,  but  rather  an  organization 
which  protects  the  producers  in  the  dealings  with  the 
established  distributing  agencies.  The  purpose  of  the 
League  is  to  "oppose  and  prevent  monopoly  in  the  pro- 
duction or  sale  of  milk,  to  encourage  competition  therein, 
and  to  protect  its  stockholders  and  the  consumers  of  milk 
against  monopoly  or  any  unlawful  combination  of  any 
kind  or  nature  whereby  the  producers  or  consumers  of 
milk  are  injuriously  affected,  to  promote  legislation  and 
board  of  health  ordinances  beneficially  affecting  the  in- 
terests of  the  stockholders  who  are  producers  of  milk  for 
the  metropolitan  district  and  other  markets,  and  to  act 
as  their  agent  in  marketing  their  products  and  to  carry 
on  all  such  business  as  its  articles  of  incorporation  au- 
thorize." 

The  producers  of  a  community  where  there  is  a  creamery, 
a  condensery,  or  a  shipping  station  form  a  local  association 
which  acts  for  the  producers  in  dealing  with  the  League, 
or  the  League  may  act  through  a  local  grange,  the  New 
York  State  Grange  having  three  members  on  the  Board 
of  Directors  of  the  League.  The  League  already  has 
several  thousand  members  representing  thousand}^  of  cows. 
The  local  organizations  have  been  formed  in  New  York 
State,  Massachusetts,  Connecticut,  New  Jersey,  and 
Pennsylvania. 


Cooperation  161 

THE   EGG   BUSINESS 

It  has  been  estimated  by  Secretary  Wilson  that  the 
value  of  the  poultry  and  eggs  produced  on  the  farm  reached 
in  1909  the  enormous  annual  value  of  $600,000,000,  or 
the  equivalent  of  the  value  of  the  hay  or  the  wheat  crop, 
and  the  production  is  rapidly  increasing.  It  has  been 
shown  by  Miss  Pennington  and  Mr.  Pierce  ^  that  there  is 
a  total  loss  of  7.8  per  cent  of  the  eggs  marketed  as  a  result 
of  improper  handling  from  the  farm  to  the  market.  It  is 
pointed  out  by  these  investigators  that  the  egg  must  be 
kept  cool  at  every  stage  of  its  handling  if  it  is  to  reach  the 
consumer  in  a  perfectly  fresh  condition.  In  describing 
the  conditions  under  which  the  egg  supply  is  handled 
from  the  farm  to  the  packing-house  the  authors  say :  — 

"The  first  responsibility  for  the  low  quality  of  market 
eggs  rests  upon  the  farmer,  and  after  him  come  the  country 
produce  dealer  or  store-keeper  and  the  shipper  who  does 
not  have  artificial  refrigeration.  Usually  the  farmer 
gathers  his  eggs  daily,  or  he  may  gather  them  at  irregu- 
lar intervals.  Stolen  nests  often  accumulate  a  large  lay, 
over  a  period  of  some  weeks,  and  may  have  been  covered 
by  brooding  hens  for  a  while,  to  boot,  before  the  farmer 
happens  to  find  them;  but  the  chances  are  that  every 
sound-shelled  egg  goes  to  market,  regardless  of  the  con- 
dition inside  the  shell.  If  the  eggs  are  gathered  with 
fair  regularity,  how  are  they  kept  while  on  the  farm? 
Generally  where  the  housewife  can  most  conveniently  get 
them  for  household  use,  not  where  the  temperature  is  low 
and  the  air  fresh.     Neither  does  the  farmer  have  any  regu- 

1  Yearbook,  U.  S.  Department  of  Agriculture,  1911. 
U 


162  Cooperation  in  Agriculture 

lax  time  for  taking  this  stock  of  eggs  to  market.  In  the 
spring,  when  they  are  most  plentiful  and  the  market  is 
falling,  he  is  apt  to  go  weekly,  or  the  egg  peddler  calls  at 
the  farm.  When  hot  weather  comes  and  the  lay  falls  off, 
he  waits  for  a  larger  nimaber  or  is  too  busy  with  'crops' 
to  drive  to  town.  Meanwhile  shrinkage  and  incubation 
are  going  on  rapidly,  and,  as  a  last  insult  to  the  hen  which 
laid  a  perfectly  fresh  egg  and  the  consumer  who  wants 
a  perfectly  fresh  egg,  he  often  goes  to  market  with  an  um- 
brella over  himself,  but  the  basket  or  box  of  eggs  is  ex- 
posed to  the  summer  sun,  a  heat  which  is  often  110  de- 
grees F.  and  may  be  10  degrees  or  more  above  that.  In 
the  autumn,  with  a  still  smaller  lay  and  a  rising  market, 
he  holds  eggs  for  high  winter  prices.  The  conditions 
under  which  he  keeps  them  are  not  conducive  to  good  pres- 
ervation, and  the  time  is  inordinately  long. 

^'From  the  country  merchant  to  the  packing-house.  — The 
country  merchant  handles  eggs  as  a  by-product,  taking 
them  in  exchange  for  merchandise.  He  makes  his  profits 
on  the  merchandise  taken  in  trade,  not  the  eggs,  frequently 
giving  an  inflated  price  for  them  to  hold  the  trade  of  the 
desired  customer.  He,  too,  is  more  apt  to  be  careless 
than  careful  of  them  while  they  are  in  his  possession,  stor- 
ing them  in  hot  or  damp  quarters  and  holding  for  high 
prices  when  production  is  low. 

"The  country  merchant  and  peddler  buy  eggs  'case 
count,'  rather  than  'loss  off.'  Buying  'case  count'  means 
that  a  uniform  price  is  paid  per  dozen,  irrespective 
of  the  quality  of  the  eggs.  Rots  bring  just  as  much  as 
good  eggs.  Buying  'loss  off'  means  that  the  eggs  are 
candled  before  payment  is  made,  and  rotten  and  broken 


Cooperation  163 

eggs  are  returned  to  the  farmer.  Occasionally  a  differ- 
ence is  made  between  first  and  second  quality  eggs. 

"The  farmer  usually  delivers  the  eggs  to  the  store- 
keeper or  packer's  agent  by  wagon.  From  these  receivers 
they  commonly  go  to  a  central  shipping  plant,  which  is 
generally  known  as  a  'packing-house,'  and  which  handles 
goods  in  car  lots.  This  plant  may  or  may  not  be  provided 
with  the  proper  facilities  for  doing  the  work  assigned  it. 
To  get  to  the  packer,  however,  the  eggs  generally  go  by 
train  and  in  comparatively  small  quantities,  therefore,  as 
'less  than  car  lots,'  or  what  is  known  to  railroad  men  as 
'l.c.l.'s.'  For  such  small  lots  and  for  short  hauls  the 
goods  are  picked  up  by  a  local  freight  train.  The  wait 
at  the  station,  which  is  frequently  only  an  open  platform 
on  which  the  cases  remain  until  the  arrival  of  the  train, 
is  ruinous  to  quality  when  the  weather  is  warm. 

"The  haul  m  the  'pick  up'  freight  car,  the  temperature 
of  which  is  governed  entirely  by  atmospheric  conditions, 
results  in  rapid  deterioration  in  summer  and  oftentimes 
freezing  in  winter.  Generally  the  time  required  for  the 
haul  from  the  agent  or  store-keeper  to  the  central  shipping 
plant  or  wholesaler  is  24  hours  or  less.  However,  it  may 
be  longer  when  the  territory  drawn  upon  is  large,  as  in 
southwestern  Kansas  or  Oklahoma,  or  when  connections 
with  small  branch  lines  are  not  frequent.  Under  such 
circumstances  the  car  becomes  an  excellent  incubator, 
holding  well  the  sun's  heat  during  the  cooler  hours  of 
night,  and  it  is  not  unusual  in  the  summer  months  for  the 
packer  to  be  greeted  by  the  cheerful  '  cheep-cheep ! ' 
of  newly  hatched  chicks  as  the  cases  are  carried  into  his 
receiving  room.    This  does  not  mean  that  atmospheric 


164  Cooperation  in  Agriculture 

temperatures  are  the  sole  source  of  incubation.  Stolen 
nests  frequently  furnish  eggs  with  chicks  so  well  developed 
that  only  a  short  time  is  needed  to  hatch  them.  It  does 
mean,  however,  great  loss  from  rots  and  spots  and  a  gen- 
eral loss  in  freshness." 

The  packer,  upon  receipt  of  the  eggs,  unpacks  them  in 
a  chilled  room,  candles  them  to  remove  rotten  and  broken 
eggs,  and  grades  them  according  to  size,  cleanliness,  and  to 
some  extent  freshness.  The  eggs  are  then  packed  in  30- 
dozen  egg  boxes  and  are  shipped  to  the  market  center  to 
a  commission  man,  after  which  they  have  to  pass  through 
the  hands  of  the  wholesaler,  perhaps  the  storage  ware- 
house, and  the  retailer. 

Some  of  the  Remedies  for  the  Egg  Situation 

In  discussing  the  remedies  for  the  existing  condition 
in  the  egg  industry,  the  authors  lay  down  the  following 
sound,  fundamental  principles :  — 

"First,  the  farmer  must  learn  to  select  good  breeds  of 
chickens  and  take  more  care  of  them,  that  eggs  may  be 
larger,  cleaner,  and  more  plentiful  on  the  farm.  He  should 
also  kill  off  all  the  mature  cocks  as  soon  as  the  breeding 
season  is  over.  It  is  commonly  supposed  that  hens  will 
not  lay  unless  males  are  present  in  the  flock,  but  such  is 
not  the  case.  Experiments  have  shown  that  flocks  with- 
out males  have  produced  as  many,  if  not  more,  eggs  than 
when  males  were  present.  When,  however,  males  are 
present,  the  eggs  are  fertile,  and  therefore  ready  to  develop 
into  chicks  when  temperatures  are  favorable.  Infertile 
eggs  grow  stale  and  shrunken,  of  course,  if  held  too  long, 
or  kept  under  bad  conditions,  but  they  do  not  form  '  heated 


Cooperation  165 

eggs/  'blood  rings,'  or  the  great  number  of  'rots'  that 
come  from  developing  embryos  and  which  account  for 
such  a  large  share  of  the  total  losses.  The  education  which 
the  farmer  should  have  in  the  gathering  and  care  of  eggs 
after  they  are  laid,  and  the  prompt  delivery  of  them  to  the 
next  person  in  the  marketing  chain,  is  self-evident  from 
the  recital  of  the  farmer's  present  methods. 

"Changes  in  the  methods  of  the  small  egg-buyer. — 
The  country  storekeepers  and  small  produce  buyers 
are,  next  to  the  farmer,  responsible  for  the  number  of 
low-grade  eggs  marketed.  They  must  be  taught  to  buy 
'loss  off'  instead  of  'case  count.'  Buying  'case  count' 
places  the  good  farmer  and  the  poor  farmer  on  the  same 
basis,  and  is  grossly  unfair  to  the  good  farmer.  The 
producer  of  good  eggs  receives  less  and  the  producer  of 
bad  eggs  more  than  they  are  worth.  What  incentive 
is  there,  on  this  basis,  for  the  farmer  to  take  extra  care  and 
trouble  ? 

"The  country  merchant  should  be  eliminated  entirely 
from  egg  handling.  He  likes  to  buy  eggs  from  the  farmer 
because  their  value  is  usually  accepted  in  groceries  and 
merchandise  rather  than  money,  and,  as  has  been  pre- 
viously said,  he  makes  a  profit  on  his  wares  if  not  from 
the  selling  of  the  eggs.  Then,  too,  if  the  farmer's  wife 
brings  in  eggs  greater  in  value  than  the  goods  she  receives 
in  trade,  her  credit  on  the  merchant's  ledger  insures  her 
continued  trading  with  him.  This  makes  eggs  practically 
a  form  of  currency.  Oftentimes  from  her  eggs  and  poultry 
a  farmer's  wife  provides  her  family  with  clothes  and  gro- 
ceries, and  it  is  not  at  all  unusual  in  small  towns  for  the 
doctor  and  dentist  to  be  paid  with  a  due  bill  on  the  mer- 


166  Cooperation  in  Agriculture 

chant  to  whom  her  eggs  have  gone,  rather  than  with 
money. 

"Frequently  the  merchant  pays  the  farmer  2  or  3  cents 
a  dozen  more  than  he  receives  for  the  eggs  when  sold  by 
him,  thus  inflating  the  price.  The  merchant  recovers 
his  loss  on  his  merchandise  and  holds  the  trade  of  the 
farmer,  but  the  man  who  makes  a  business  of  buying  eggs 
suffers,  and  so  does  the  townsman  who  has  no  eggs  to 
trade,  but  must  pay  the  same  money  price  for  goods  that 
the  farmer  pays  in  eggs. 

"Again,  the  merchant  will  buy  'case  count*  rather 
than  'loss  off,'  fearing  to  offend  his  patron.  Hence, 
the  produce  dealer  must  do  the  same,  because  of  the  scar- 
city of  eggs,  close  competition,  and  the  farmer's  lack  of 
business  knowledge.  He  cannot  see  that  he  actually 
loses  money  at  the  merchant's. 

"To  prevent  the  loss  in  eggs  due  to  the  country  mer- 
chant, a  cash  business  on  the  quality  basis  should  be  in- 
stituted. Then  the  small  egg  merchant  could  buy  'loss 
off,'  pay  for  the  eggs  in  money,  and  the  farmer  could 
purchase  his  supplies  where  they  are  best  and  most  rea- 
sonable. If  competition  were  placed  where  it  belongs, 
among  the  regular  egg-buyers,  the  eggs  would  go  to  market 
more  rapidly  and  in  better  condition. 

"Another  bad  habit  which  is  gaining  in  the  country- 
side is  the  leaving  at  the  farm  by  the  packer  or  merchant 
of  carriers  holding  30  dozen.  The  farmer  waits  until  the 
case  is  full  before  marketing.  This  is  not  objectionable 
when  the  flock  is  large  or  production  rapid,  but  out  of 
season  or  on  the  small  place  it  means  three  or  four  weeks* 
holding  to  get  a  full  30-dozen  box. 


Cooperation  167 

"  Buying  eggs  hy  quality  —  not  by  count.  —  The  ship- 
per can  materially  improve  the  quality  of  eggs  in  the 
market  if  he  persistently  buys  by  quality  —  not  simply 
by  count.  He  will  also  improve  his  business.  This  has 
been  tried  sporadically,  by  a  shipper  or  two,  here  and 
there,  but  all  except  a  few  firms  have  forsaken  their  guns 
when  shots  were  most  needed  —  that  is,  when  eggs  be- 
came scarce  or  low  grade,  and  competition  began  to  be 
felt.  One  packer  has  adhered  to  a  quality  basis  for  12 
years,  using  four  grades.  He  has  built  up  a  business  which 
is  good  and  a  reputation  which  is  even  better.  This  repu- 
tation prevails  not  only  on  the  market,  where  his  egg 
pack  is  taken  without  a  question,  but  among  the  farmers 
and  peddlers  who  supply  him  with  eggs.  His  grading  is 
accepted  by  them,  and  their  aim  is  now  not  only  to  see 
how  many  eggs  they  can  bring  in,  but  how  many  of  them 
can  be  gotten  to  him  as  'number  ones.'  Here  is  a  real 
educator  as  well  as  a  good  business  man. 

"Refrigerated  receiving  stations. — The  packer,  too, 
must  have  artificially  refrigerated  rooms  for  handling 
and  holding  eggs.  Indeed,  it  seems  likely  that,  as  the 
egg  and  poultry  industry  develops,  and  we  must  give  more 
attention  to  the  saving  of  the  garnered  foodstuffs,  there 
will  be  numerous  receiving  stations  throughout  the  coun- 
try, easy  of  access  and  artificially  refrigerated,  that  per- 
ishable products  in  general  may  be  economically  handled 
at  the  source  of  production. 

"Care  of  eggs  at  the  source  of  production.  —  The  source 
of  production :  there  is  the  starting  point  for  most  of 
the  trouble  in  the  handling  of  perishable  produce,  be  it 
Southern  cotton  mishandled  in  the  field  before  it  is  baled, 


168  Cooperation  in  Agriculture 

or  Western  com  that  is  not  well  dried  before  it  goes  to 
the  elevator,  or  eggs  that  are  heated  or  soiled  or  cracked 
on  the  farm.  Not  all  the  trouble  is  at  the  starting  place, 
of  course.  Good  handling  must  be  everywhere  from  the 
producer  to  the  consumer  if  the  maximum  of  quality  and 
the  minimum  of  loss  is  to  be  maintained.  But  even  per- 
fection of  handling  at  the  market  center  cannot  compen- 
sate for  bad  treatment  at  the  source  of  supply.  The  whole- 
saler is  being  driven  to  good  equipment  and  good  methods 
because  it  is  economy ;  the  retailer  is  being  forced,  little 
by  little,  to  tell  the  truth  because  the  strong  arm  of  edu- 
cation and  the  long  arm  of  the  law  are  both  after  him; 
but  the  farmer,  the  country  merchant,  and  the  small 
packer  are  sadly  in  need  of  precept  and  example  for  the 
sake  of  both  the  producer  and  the  consumer." 

MABKETING  EGGS  THROUGH  THE  CREAMERY 

A  practical  way  to  improve  the  conditions  in  the  egg 
industry  is  to  form  a  cooperative  egg-distributing  associa- 
tion as  an  adjunct  to  the  cooperative  creamery.  Several 
associations  of  this  type  are  already  in  existence  in  the 
United  States.  There  are  numbers  of  similar  societies  in 
Denmark  and  in  other  foreign  countries.  The  method 
of  marketing  eggs  through  an  association  connected  with 
a  creamery  is  described  by  Slocum  ^  as  follows  :  — 

"The  marketing  of  eggs  in  this  particular  instance  is 
accomplished  through  a  creamery  in  the  northern  part 
of  Minnesota.  Because  of  the  fact  that  farmers  must 
take  their  milk  or  cream  to  the  creamery  at  frequent 

^  Farmers'  Bulletin  445,  U.  S.  Department  of  Agriculture. 


Cooperation  169 

and  regular  intervals,  it  is  an  agency  especially  well  suited 
to  obtaining  the  egg  in  a  fresh  condition  from  the  farmer. 
As  it  seems  that  there  must  be  other  creameries  so  situated 
that  they  could  readily  put  their  eggs  directly  in  the  hands 
of  a  retailer  in  a  fair-sized  city  with  only  a  short  shipment, 
it  seems  well  to  describe  in  detail  the  methods  used  in 
this  case.  The  volume  of  eggs  handled  in  this  way  would, 
of  course,  probably  never  become  so  great  as  to  make 
them  a  factor  in  the  mass  of  eggs  now  handled  com- 
mercially. 

"As  stated  before,  the  eggs  are  brought  by  the  farmer 
directly  to  the  creamery  when  bringing  his  milk.  While 
this  particular  creamery  is  privately  owned,  it  is  essentially 
cooperative,  in  that  its  owner  and  manager  is  a  far-sighted 
business  man  with  other  interests  in  the  village,  and  he 
sees  that  the  increased  agricultural  prosperity  of  the  com- 
munity will  eventually  be  to  his  advantage.  In  conse- 
quence he  is  content  to  take  a  small  profit  for  himself 
and  to  pay  the  farmers  as  liberally  as  possible  for  both  their 
cream  and  eggs.  Any  patron  of  the  creamery  or  any  other 
person  who  will  sign  a  required  agreement  may  market 
his  eggs  in  this  way.  At  present  about  one  hundred  and 
thirty-five  farmers  are  taking  advantage  of  this  method 
of  disposing  of  their  eggs.  These  egg  patrons  are  scat- 
tered over  quite  a  wide  territory,  one  man  finding  it  to 
his  advantage  to  drive  in  14  miles  with  his  eggs. 

"The  agreement  reads  as  follows  :  — 

" '  For  the  privilege  of  selling  eggs  to  the  creamery  company  and 
getting  a  market  established  for  guaranteed  fresh  eggs,  I,  the 
undersigned,  hereby  pledge  myself  to  comply  in  every  way  with 
the  following  rules  :  — 


170  Cooperation  in  Agriculture 

"  '  I  agree  to  deliver  eggs  at  the  creamery  that  will  not  be  to 
exceed  8  days  old  and  to  be  picked  in  (gathered)  twice  every  day. 

" '  Eggs  to  be  of  uniform  size  (no  under-size  or  over-size  eggs). 

"  *  Eggs  to  be  clean  and  to  be  kept  in  a  cool,  dry  cellar. 

" '  Brown  eg^s  to  be  put  in  one  carton  and  white  in  another  and 
so  marked. 

"  '  Each  egg  to  be  stamped  on  the  side  and  carton  to  be  stamped 
on  the  top. 

" '  I  agree  not  to  sell  any  eggs  that  I  have  marked  with  the 
creamery  company's  trade-mark  to  any  one  else  but  the  creamery 
company,  and  to  retxirn  stamps  and  other  supplies  that  have  been 
furnished,  in  case  I  should  decide  to  discontinue  to  sell  eggs  to 
the  creamery  company.' 

"It  is  readily  discernible  from  the  provisions  of  this 
agreement  that  the  aim  is  to  get  a  grade  of  miiform,  clean, 
dependable  eggs,  of  reasonable  freshness.  It  might  seem 
that  requiring  delivery  once  in  eight  days  would  not  be 
frequent  enough,  but  the  nights  in  Minnesota  even  in 
summer  are  said  to  be  usually  cool,  and  this  condition, 
together  with  the  gathering  twice  a  day  and  the  storage 
in  dry,  cool  cellars,  must  account  for  the  fact  that  no  com- 
plaints have  been  received  on  the  score  of  staleness. 

"The  separation  of  the  brown  and  the  white  eggs  serves 
two  purposes.  First,  it  promotes  uniformity  and  greater 
attractiveness  of  appearance,  and  second,  it  encourages 
the  keeping  of  the  breeds  of  hens  which  lay  white  eggs, 
because  the  owner  of  the  creamery  pays  during  the  spring 
months  1  cent  more  for  white  eggs  than  for  brown.  The 
creamery  owner  justifies  this  action  by  the  statement  that 
it  was  his  belief  that  his  markets  would  pay  a  premium 
for  white  eggs  in  the  near  future,  and  that  he  wished  to 
stimulate  the  keeping  of  one  class  of  chickens,  so  as  to 
insure  a  more  uniform  product. 


Cooperation  171 

"To  every  person  signing  the  agreement  quoted  above 
a  small  rubber  stamp  is  given  for  use  in  stamping  the  eggs 
and  the  container.  This  stamp  plays  an  important  part 
in  the  system  of  marketing.  It  contains  the  name  of 
the  creamery,  the  creamery  brand,  and  a  serial  number  for 
each  producer.  By  means  of  the  stamp  which  thus  ap- 
pears on  each  egg  and  on  each  package  it  is  possible  to 
trace  the  product  back  to  the  individual  producer,  and 
in  consequence  to  place  the  blame  for  any  carelessness  or 
poor  quality  where  it  belongs.  A  repetition  of  any  offense 
of  this  nature  may  be  sufficient  ground  for  refusing  to 
handle  the  eggs  of  that  particular  producer. 

"When  the  creamery  patron  signs  the  agreement,  and 
at  such  times  thereafter  as  may  be  necessary,  he  is  fur- 
nished with  a  supply  of  cartons  or  containers  in  addition 
to  the  rubber  stamp.  These  cartons  are  the  ordinary 
one-dozen  size  pasteboard  egg  boxes  which  are  so  shaped 
that  they  may  be  packed  in  a  regular  30-dozen  egg  case. 
The  following  guaranty  is  printed  on  the  top  of  the  car- 
ton:— 

This  package  contains 
ONE   DOZEN   GUARANTEED   FRESH   EGGS 

Creamery  Company 

Manufacturers  and  Dealers 
Eggs,  Butter,  Pasteurized  Cream,  and  Ice  Cream 
Minnesota. 

Note.  —  Eggs  in  tliis  package,  if  they  have  our  trade-mark  on 
them,  are  guaranteed  to  be  strictly  fresh,  clean,  and  full  size, 
and  if  ever  found  otherwise,  we  wish  you  woxild  do  us  the  favor 
to  report  it,  giving  number  found  on  the  egg. 
Creamery  Company. 


172  Cooperation  in  Agriculture 

"The  farmer  takes  these  cartons  home,  and  as  the  eggs 
are  gathered  each  day,  the  clean,  good-sized  eggs  are 
stamped  and  placed  m  them.  When  a  carton  is  filled,  it 
is  stamped  on  its  upper  side  just  the  same  as  the  eggs. 

"When  the  farmer  comes  into  the  creamery  with  his 
milk  or  cream,  he  brings  along  as  many  cartons  or  dozens 
of  eggs  as  he  has.  The  man  in  charge  of  the  creamery 
takes  these  eggs,  examines  the  packages,  and  gives  the 
farmer  a  check  for  the  eggs  delivered  that  day.  The  car- 
tons are  then  packed  in  substantial  returnable  30-dozen 
egg  cases  and  shipped  to  market  by  express.  The  ship- 
ping charges  are  paid  by  the  consignee.  The  labor  and 
cost  of  handling  the  eggs  at  the  creamery  are  thus  re- 
duced to  a  minimum.  The  eggs  are  never  candled, 
reliance  being  placed  on  the  farmer  to  bring  in  good  eggs. 
The  cost  of  handling  the  eggs,  including  the  cost  of  the 
carton,  which  is  about  one-half  cent,  is  estimated  to  be 
1  cent  a  dozen.  The  farmer  in  turn  feels  bound  to  be  partic- 
ular, knowing  that  any  carelessness  can  be  traced  back 
to  him  and  realizing  that  he  thus  jeopardizes  his  chances 
of  continuing  to  dispose  of  his  eggs  in  this  manner.  This 
he  cannot  well  afford  to  do,  as  will  be  shown  later  by  a 
comparison  of  the  prices  received  for  eggs  marketed 
through  the  creamery  and  through  the  general  store. 

"In  this  particular  case  the  creamery  happens  to  be 
located  within  easy  shipping  distance  of  Duluth,  Minn., 
and  this  city  was  chosen  as  a  market  for  the  eggs.  One 
of  the  best  grocery  stores  was  already  handling  butter 
made  by  the  creamery  and  was  in  consequence  glad  to 
take  the  eggs.  The  eggs,  therefore,  pass  through  only 
one   dealer   between   the   creamery   and   the   consumer. 


Cooperation  173 

These  eggs,  because  fresh,  were  soon  in  great  demand  by 
the  customers  of  this  store,  and  though  sold  for  several 
cents  a  dozen  more  than  other  eggs  handled,  were  always 
taken  in  preference.  It  is  interesting  to  note  that  during 
the  year  and  a  half  that  this  store  has  been  handling  the 
eggs,  only  two  complaints  have  been  made  as  to  their 
quality.  It  is  also  significant  of  the  recognition  of  their 
quality  that  the  demand  for  them  has  greatly  increased 
and  that  persons  living  on  the  opposite  side  of  the  city 
make  special  trips  to  this  store  by  street  car  solely  for 
the  purpose  of  buying  some  of  these  eggs.  The  brand 
which  is  placed  on  the  eggs  and  on  the  cartons  has  become 
strongly  associated  with  quality  in  the  minds  of  the  con- 
sumers. This  is  illustrated  by  the  statement  that  two 
cases  of  these  eggs  which  came  in  unbranded  for  some  rea- 
son or  other  were  disposed  of  as  eggs  from  this  particular 
creamery  only  after  a  good  deal  of  difficulty  and  on  the 
personal  guaranty  of  the  proprietor.  The  consumers 
noticed  the  absence  of  the  brands  and  demanded  eggs  so 
stamped." 

Advantages  of  this  System  of  Handling  Eggs 

"Previous  to  the  inauguration  of  this  method  of  han- 
dling the  eggs  by  the  creamery  the  farmers  brought  their 
eggs  to  the  general  store  and  traded  them  for  merchandise 
in  the  usual  manner.  When  the  creamery  first  began 
to  handle  eggs,  this  innovation  was  looked  upon  with 
disfavor  by  the  merchants,  who  feared  that  they  would 
lose  some  trade  because  of  the  fact  that  the  farmers  re- 
ceived cash  for  their  product.  Gradually,  however,  these 
merchants  have  come  to  realize  that  as  this  method 


174  Cooperation  in  Agriculture 

brought  a  greater  return  to  the  community  for  its  eggs, 
it  helped  to  increase  the  general  prosperity  and  that  under 
these  circumstances  their  trade  improved  rather  than  de- 
generated. In  consequence  they  have  come  to  favor  the 
step  heartily,  to  feel  a  pride  in  it,  and  finally  to  feel  grate- 
ful for  being  relieved  of  the  necessity  of  handling  the  eggs. 

"The  advantage  of  this  system  of  marketing,  to  the 
farmers  or  producers,  has  come  about  in  two  ways  :  First, 
it  has  increased  the  price  paid  to  them  by  compelling  an 
improvement  in  quality,  by  selling  more  directly  to  the 
consumer,  and  by  establishing  a  reputation  for  the  eggs 
sold  under  the  creamery  brand.  Second,  it  has  brought 
about  a  realization  that  poultry  raising  by  the  general 
farmer  is  profitable,  that  the  income  from  this  source  is 
considerable,  and  that  it  is  capable  of  increase  by  keeping 
better  fowls  and  giving  them  better  care. 

"The  increase  in  price  which  the  farmer  is  realizing 
for  his  eggs  as  a  consequence  of  the  introduction  of  the 
new  method  varies  with  the  season.  During  the  spring, 
when  eggs  are  plentiful  and  quite  uniformly  good  in 
quality,  the  difference  is  small  and  does  not  amount  to 
over  1  or  2  cents.  From  this  time  on  the  difference  in- 
creases until  the  following  winter,  when  it  reaches  as  high 
as  10  cents  or  more.  During  the  month  of  December, 
1909,  when  this  creamery  was  visited,  farmers  were  re- 
ceiving 40  cents  a  dozen  for  their  eggs  and  continued  to 
do  so  during  the  entire  month.  At  this  very  time,  as 
determined  by  personal  investigation,  farmers  in  a  vil- 
lage of  a  near-by  portion  of  the  state  were  receiving  25 
cents  a  dozen.  There  was,  moreover,  absolutely  no  ex- 
pense of  marketing  to  come  out  of  this  40  cents,  as  even 


Cooperation 


175 


the  cartons  in  which  the  eggs  were  packed  were  furnished 
by  the  creamery.  From  the  following  table  giving  the 
average  price  paid  by  the  creamery  by  months  during 
1909,  it  can  be  seen  that  the  return  to  the  farmer  is  very 
satisfactory,  and  far  better  than  that  received  where  eggs 
are  marketed,  through  the  country  store,  where  a  bad 
egg  is  worth,  or  rather  brings,  as  much  as  a  good  egg :  — 

Average  Price  paid  by  Creamery  for  Eggs  in  1909 


Month 


NUMBEB 

Marketed 


Average 

Price  paid 

Farmeb 


January 
February- 
March    . 
April 
May  .    . 
June  .    . 
July  .    . 
August  . 
September 
October 
November 
December 


Dozens 

630 

1329 

1771 

2069 

2445 

1725 

1509 

1898 

1562 

507 

229 

810 


Cents 
35.6 
25.9 
19.0 
18.2 
19.8 
20.0 
22.7 
24.5 
25.1 
27.0 
37.4 
40.0 


"In  this  particular  Minnesota  village  during  the  year 
1909,  which  was  just  previous  to  marketing  the  eggs  by 
the  new  method,  the  eggs  received  by  the  storekeepers 
hardly  more  than  supplied  the  local  demand.  In  fact, 
during  the  whole  of  that  year  only  15  cases,  or  450  dozen 
eggs,  were  shipped  out  of  the  village.  During  the  year 
1909  nearly  $4000  was  paid  out  by  the  creamery  for  eggs, 


176  Cooperation  in  Agriculture 

all  of  which  were  shipped  away.  The  impetus  which  has 
been  given  the  poultry  business  during  the  short  time  this 
method  of  marketing  has  been  practiced  may  be  judged 
from  the  statement  of  the  proprietor  of  the  creamery  that 
from  present  indications  he  expected  the  egg  business  to 
double  or  treble  during  the  year  1910. 

"  Along  with  this  increase  in  the  volume  of  egg  receipts, 
which  indicates  a  realization  of  the  profitableness  of  the 
business  and  an  increase  in  the  number  of  fowls  kept, 
has  come  an  awakening  to  the  value  of  better  stock  and 
improved  methods.  It  is  noticeable  that  pure-bred  poultry 
is  being  introduced  and  is  replacing  the  old  flocks  of  mon- 
grel fowls.  Poultry  papers  are  being  subscribed  for,  and 
publications  on  poultry  raising  are  in  demand.  New 
and  better  hen  houses  are  being  built,  and  systematic  at- 
tention is  being  given  to  the  care  and  feeding  of  the  fowls. 
The  great  part  of-  this  awakening  to  the  possibilities  of 
poultry  keeping  is  directly  traceable  to  the  method  of 
marketing  the  eggs  through  the  creamery  which  is  used 
in  this  locality." 

Conclusion  on  Handling  of  Eggs  through  Creamery 

"It  cannot  be  denied  that  in  the  particular  case  de- 
scribed above,  marketing  eggs  through  the  creamery  has 
been  a  success.  It  has  brought  about  carefulness  on  the 
part  of  the  producer  and  a  most  decided  improvement  in 
the  quality  of  the  eggs.  It  has,  moreover,  provided  the 
market  with  a  grade  of  good,  fresh  eggs,  which  are  always 
in  demand  and  which  at  present  are  almost  unobtainable 
at  certain  seasons  in  the  cities.  It  has,  in  doing  this, 
prevented  a  considerable  waste  and  loss  in  quality  which 


Cooperation  177 

is  normally  associated  with  the  marketing  of  eggs  in  the 
Middle  West,  and  has  increased  very  materially  the  price 
which  the  producer  receives.  It  would  appear,  in  view 
of  the  fact  that  the  creamery  seems  a  logical  and  natural 
agency  for  the  handling  of  eggs  to  good  advantage,  that 
this  method,  with  modifications,  is  adaptable  to  a  wide 
range  of  conditions,  and  that  many  creameries  could 
well  afford  to  make  eggs  as  well  as  butter  one  of  the  prod- 
ucts which  they  handle.  Wherever  this  method  is  adopted 
it  should  mean  a  most  acceptable  increase  in  the  price 
received  by  the  farmer  for  his  eggs,  and  this  without  any 
increase  in  cost  to  the  consumer." 

In  December,  1911,  according  to  Mr.  Slocum,  there 
were  fourteen  creameries  that  were  handling  eggs  direct 
from  the  farmer  along  the  general  lines  already  described. 
Seven  more  creameries  and  egg  dealers  expected  to  take 
up  the  handling  of  eggs  in  a  similar  manner  at  that  time, 
and  a  general  interest  was  awakened  in  the  movement  by 
the  publication  of  the  bulletin  by  the  Department  of 
Agriculture. 

COOPERATION   IN   THE   HANDLING   OF   EGGS   IN   OTHER 
COUNTRIES 

In  Denmark  there  is  a  very  elaborate  and  extensive 
system  of  cooperation  in  use  in  the  marketing  of  eggs. 
The  Danish  Farmers  and  Cooperative  Egg  Export  Asso- 
ciation was  organized  in  1895,  and  in  1909  it  included  five 
hundred  egg-collecting  circles,  aggregating  43,000  mem- 
bers. This  association  markets  poultry  as  well  as  eggs. 
Its  central  office  is  in  Copenhagen.  In  addition,  there 
are  ten  other  packing  plants.     The  members  pay  an  entry 


178  Cooperation  in  Agriculture 

fee  of  thirteen  and  one-half  cents.  The  sales  during  1907 
were  some  ten  million  pounds  of  eggs  and  poultry,  valued 
at  about  $1,080,000.  The  object  of  the  association  is 
said  to  be  to  establish  the  best  possible  market  in  foreign 
countries  for  Danish  eggs  by  guaranteeing  that  the  eggs 
delivered  with  the  registered  trade-mark  stenciled  on 
each  egg  are  absolutely  fresh  and  clean  and  by  protecting 
the  general  interest  of  the  Danish  poultry  keepers  by  pre- 
serving eggs  and  fattening  and  selling  the  poultry  of  the 
members,  permitting  a  rational  poultry  management. 
The  printed  statutes  for  the  egg  circles  read  as  follows  :  — 

"No.  1.  The  'circle'  belongs  to  the  'Danish  Cooperative  Eg^ 
Export  Association '  and  has  to  submit  to  its  statutes  in  force  at 
any  time. 

"No.  2.  Members  are  accepted  on  application  to  the  officers 
of  the  'circle.'  They  pay  13.5  cents  each  and  as  a  fee  to  the 
main  association. 

"No.  3.  Every  member  is,  without  any  special  declaration, 
under  the  laws  of  the  'circle'  as  they  now  are,  or  as  they  may 
legally  be  amended. 

"No.  4.  Members  have  to  deliver  all  eggs  produced  by  their 
hens  —  home  consumption,  setting  eggs,  and  accidentally  foimd 
ones  excepted  —  in  the  manner  and  on  the  days  decided  on  by 
the  officers  of  the  'circle.'  This  obligation  holds  good  for  one 
calendar  year  at  a  time. 

"No.  5.  No  eggs  older  than  seven  days  may  be  delivered; 
transgression  of  this  rule,  as  well  as  the  delivery  of  stale  eggs, 
is  punishable  by  a  fine  of  $1.35  imposed  by  the  directors  of  the 
cooperative  association  (main  association)  and  may  be  increased 
to  $2.70.  One-half  of  the  fine  goes  to  the  main  association  and 
the  other  half  to  the  'circle'  in  question.  The  decision  of  the 
main  directors  —  irrespectively  of  that  of  the  'circle'  directors 
or  of  the  egg  collector  —  cannot  be  appealed.  In  case  of  a  suit 
for  the  collection  of  the  fine,  the  party  sued  will  have  to  pay  the 
cost  irrespectively  of  the  law  of  August  6,  1824. 


Cooperation  179 

"No.  6.  The  eggs  must  be  carefully  collected  every  day  and, 
in  the  hot  season,  twice  a  day  at  least.  Accidentally  discovered 
eggs  (stolen  nests)  must  not  be  delivered.  Artificial  eggs  only 
may  be  used  as  nest  eggs,  and  the  hens  must  be  kept  from  the 
nests  dxiring  the  night. 

"No.  7.  Only  clean  eggs  may  be  delivered,  and  they  must  be 
kept  protected  against  the  sun,  rain,  and  frost  by  the  members 
as  well  as  by  the  collector. 

"No.  8.  The  members  may  only  deliver  eggs  to  the  'circle' 
from  their  own  hens ;  transgression  of  this  rule  leads  to  a  fine 
of  6.75  cents  for  the  first  time  and  13.5  cents  the  second  time  per 
pound  of  any  such  unauthorized  deliveries. 

"No.  9.  The  membership  list  of  the  'Circle'  must  show  the 
nimiber,  the  name,  and  position  of  each  member  and  the  number 
on  the  list  must  be  the  same  as  that  with  which  he  stamps  his 
eggs.  Changes  in  the  list  must  be  reported  by  the  'circle'  chair- 
man to  the  main  office.  Every  member  receives  —  on  payment 
of  5.4  cents  —  a  rubber  stamp  with  ink  and  pad.  The  number 
of  the  'circle'  as  well  as  that  of  the  member,  appears  on  this 
stamp,  and  each  egg  must  be  stamped  plainly  and  neatly  on  the 
big  end. 

"No.  10.  The  egg  collector  can  only  accept  eggs  which  are 
clean  and  plainly  and  neatly  stamped. 

"No.  11.  The  'circle'  directors  may  temporarily  refuse  to 
accept  eggs  from  a  member,  and  a  member  may  be  expelled  by  a 
majority  vote  at  a  general  meeting  or  by  the  main  directors. 

"No.  12.  The  necessary  capital  for  paying  cash  on  delivery 
of  the  eggs  of  the  members  is  provided  by  a  loan,  the  members 
of  the  '  circle  *  becoming  responsible  for  this  loan  which  is  paid  to 
the  egg  collector  who  has  to  provide  a  satisfactory  bond. 

"No.  13.  The  eggs  are  paid  for  on  receipt  at  the  price  set  by 
the  '  circle '  directors.  Whatever  more  the  eggs  may  net  is  only 
paid  to  the  members,  after  retaining  a  suitable  amount  for  the 
working  capital  according  to  the  views  of  the  'circle'  directors. 

"No.  14.  Notice  of  withdrawal  is  given  to  the  'circle'  direc- 
tors, but  only  so  as  to  take  effect  at  the  end  of  the  business  year. 
Withdrawn  or  expelled  members  have  no  claim  on  surplus  reserve 


180  Cooperation  in  Agriculture 

fund  or  other  assets  of  the  'circle, '  and  they  have  to  return  their 
stamp,  without  compensation,  to  the  'circle'  chairman. 

''No.  15.  The  board  of  directors  of  the  circle  consists  of  an 
uneven  number  of  members,  and  they  are  elected  at  the  general 
meeting. 

"No.  16.  The  work  of  the  directors  is  to  take  care  of  the  busi- 
ness of  the  'circle'  in  the  best  manner  possible,  thus  seeing  to  it 
that  the  eggs  are  delivered  to  the  association  in  the  condition 
demanded.  The  'circle'  directors  appKjint  and  discharge  the 
egg  collector  and  other  employees  of  the  '  circle, '  determine  their 
compensation,  and  supervise  their  work.  (Their  pay  is  generally 
27  cents  per  100  lbs.  eggs  for  collecting.  —  J.  H.  M.) 

"No.  17.  The  general  meeting  elects  annually  two  auditors 
who  audit  the  year's  account  before  the  end  of  January  the  fol- 
lowing year. 

"No.  18.  The  regular  annual  meeting  is  held  in  the  first  part 
of  February  in  time  for  eventful  suggestions  to  the  main  direc- 
tors to  be  submitted  to  their  chairman  before  Feb.  20. 

"No.  19.  The  'circle'  sends  a  delegate  to  the  general  meeting 
of  the  main  association. 

!'No.  20.  In  case  of  an  eventful  dissolution  of  the  'circle,' 
any  possible  surplus  —  after  settling  all  liabilities  —  is  to  be 
divided  between  the  members  in  proportion  to  the  eggs  delivered 
by  them  during  the  last  year." 

The  main  association  elects  at  the  annual  meeting  seven 
members  as  representatives.  A  Board  of  Directors  is  com- 
posed of  four  of  the  representatives.  A  Chairman  is  also 
elected  who  serves  for  two  years.  The  directors  serve  for 
five  years.  The  executive  committee  of  the  association 
consists  of  the  Chairman,  the  Manager,  and  one  member. 

As  an  illustration  of  the  growth  of  the  Danish  Coopera- 
tive Egg  Export  Association  may  be  cited  the  fact  that 
in  1909  it  sold  7,750,789  pounds  of  eggs  abroad  besides 
1,258,582  pounds  at  home  and  in  addition  462,504  pounds 


PLATE   X.  — Curing-tents  for  Lemons.     Chapters  IV,  VIIL 


Lemon  Curing-tents,  showing  Fruit  Stored  in  Boxes. 


Lkmon  Cuhing-tents,  showing  Fruit  Stacked  in  Tr.j 


Cooperation  181 

of  cracked  eggs.  The  average  price  for  the  eggs  was  12,86 
cents  per  pound,  amounting  to  $1,233,115.03.  The  aver- 
age price  paid  to  the  patrons,  including  the  surplus,  was 
12.02  cents  per  pound. 

At  the  annual  meeting  of  the  association  in  1910  the 
payment  of  the  initial  membership  fee  of  14  cents  was 
abolished  because  the  reserve  fund  at  that  time  amounted 
to  $81,000. 

The  Agricultural  Department  of  Canada  has  been  active 
in  studying  the  cooperative  marketing  of  eggs.  Professor 
F.  C.  Elford  said  in  a  public  address  in  1910 :  "The  work 
of  the  association  (the  Poultry  Producers'  Association  of 
Eastern  Canada)  is  to  get  the  producers  to  form  cooperative 
collective  circles  such  as  they  have  in  Denmark  and  other 
European  countries.  At  these  circles  one  man  would 
receive,  grade,  and  market  the  produce  for  the  community, 
and  all  such  circles  would  have  a  uniform  system.  Both  the 
Dominion  government  and  the  Quebec  government  have 
taken  up  the  matter  and  are  doing  what  they  can  to  for- 
ward the  cooperative  work." 

In  Australia  one  state  has  twenty-one  egg  circles  con- 
sisting principally  of  small  farmers.  The  Secretary  of 
each  center  receives,  tests,  and  grades  the  eggs,  pays  cash 
for  them  at  the  current  market  rate,  and  sends  them  to  the 
government  cold  stores.  The  government  does  the  mar- 
keting and  at  the  end  of  each  quarter  any  profits  are  di- 
vided among  the  suppliers.  The  Secretary  of  each  center 
receives  one  cent  per  dozen  for  the  eggs  he  handles.  Under 
this  method  there  is  no  middleman's  profit.^ 

*  A^.  Y.  Produce  Review  and  American  Creamery,  v.  29,  No.  12,  Janu- 
ary 12,  1910. 


182  Cooperation  in  Agriculture 

COOPERATION   IN  THE   COTTON   INDUSTRY 

The  annual  cotton  crop  of  the  United  States  amounts 
to  twelve  million  bales.  It  is  grown  on  thirty-six  million 
acres,  Texas,  Georgia,  Alabama,  Mississippi  and  Okla- 
homa and  Indian  Territory  ranking  foremost  in  importance 
among  the  cotton-growing  states.  The  annual  value  of 
the  cotton  crop,  including  the  lint  and  the  seed,  amounts 
to  more  than  three-quarters  of  a  billion  dollars.  The 
value  of  the  exports  of  American  cotton  equals  half  a 
billion  dollars,  or  approximately  one-half  the  total  annual 
value  of  the  exports  of  all  domestic  farm  products.^ 

Conditions  Surrounding  the  Cotton  Industry 

One  of  the  greatest  economic  problems  that  has  faced 
the  South  is  the  annual  financing  of  the  cotton  farmer. 
There  are  several  kinds  of  farmers  engaged  in  cotton  grow- 
ing, the  large  land-owTier,  who  manages  his  own  property, 
the  large  estate  that  may  be  sublet  to  tenants  or  is  man- 
aged under  some  form  of  superintendence,  and  the  small 
farm  managed  either  by  an  owner  or  by  a  tenant.  The 
large  land-owner  usually  is  able  to  finance  his  operations 
through  regular  banking  channels,  but  with  the  small 
farm  owner  or  the  tenant  the  case  is  different.  The  aver- 
age small  farmer  has  no  surplus  capital  with  which  to 
develop  his  place  or  to  carry  on  his  annual  operations. 
His  assets  are  small,  and  he  can  furnish  little  security  for 
credit  except  the  growing  cotton.  He  usually  obtains 
credit  from  the  local  storekeeper  and  gives  a  lien  on  the 
crop  as  security  for  the  bill  which  he  accumulates  during 

*  Year  Book,  U.  S.  Department  Agriculture,  1911. 


Cooperation  183 

the  season  at  the  store.  To  meet  these  credit  demands 
he  is  obliged  to  turn  his  cotton  over  to  the  storekeeper 
at  the  gin  as  soon  as  it  is  harvested ;  and  to  protect  him- 
self the  storekeeper  has  to  charge  the  cotton  grower  a 
high  price  for  everything  he  purchases.  The  farmer  may 
borrow  money  from  a  cotton  factor  in  which  case  he  ships 
the  ginned  cotton  to  him  to  be  sold  on  commission. 

The  small  tenant  farmer  is  in  an  even  more  helpless 
condition  than  the  small  farm  owner.  The  stock,  the 
feed,  and  the  tools  are  furnished  by  the  land-owner.  He 
has  a  still  smaller  security  to  offer  for  credit.  The  local 
merchant  gives  him  store  credit  and  takes  a  lien  on  his 
share  of  the  crop  for  security,  placing  the  tenant  farmer  be- 
tween two  millstones  —  the  owner,  on  the  one  hand,  who  is 
interested  in  large  crops,  and  the  storekeeper,  on  the  other, 
from  whom  he  secures  credit  at  a  high  rate  of  interest. 

Since  the  advent  of  the  boll  weevil,  the  Southern  farmer, 
through  the  efforts  of  the  United  States  Department  of 
Agriculture,  has  introduced  a  more  diversified  crop  sys- 
tem, including  corn,  alfalfa,  peanuts,  and  stock-raising, 
and,  to  some  extent,  this  has  relieved  the  distressing  finan- 
cial condition  by  giving  the  cotton  farmer  something 
besides  cotton  to  fall  back  on.  Taken  as  a  whole,  the 
Southern  farming  system  has  compelled  the  farmer  to 
sell  his  crop  as  soon  as  it  is  harvested  at  such  prices  as 
the  local  merchant  is  obliged  to  pay.  It  results  in  the 
almost  complete  separation  of  the  producer  from  any  part 
in  the  marketing  of  the  crop.  It  depresses  the  prices  of 
cotton  in  the  fall  by  forcing  it  all  on  the  market  at  one 
time,  and  the  subsequent  advances  in  prices  are  absorbed 
by  the  various  middlemen  through  whose  hands  it  passes 


184  Cooperation  in  Agriculture 

from  the  local  merchant  to  the  mill.  Since  the  work  of 
the  Department  of  Agriculture  was  started  it  is  said  that 
the  number  of  farmers  who  pledge  their  crops  as  security 
for  loans,  is  rapidly  decreasing.  The  growers  are  beginning 
to  sell  their  own  crops  to  local  buyers,  to  travehng  buyers, 
or  in  other  ways. 

The  Cotton-Distributing  System 

The  distribution  of  the  cotton  crop  from  the  producer 
to  the  spinner  is  one  of  the  most  complicated  of  the  Ameri- 
can farm  crop  distributing  systems.  The  cotton  crop  is 
sold  at  the  gin  or  in  lots  of  a  few  bales  of  about  500  pounds 
each  at  a  station  to  the  local  merchant,  to  jobbers,  or  to 
representatives  of  the  cotton  merchants,  or  to  representor 
tives  of  the  mills.  After  the  bales  have  been  compressed 
the  bulk  of  the  cotton  crop  is  then  assembled  in  a  number 
of  interior  cities  or  towns,  among  which  are  Houston,  St. 
Louis,  Memphis,  Augusta,  and  Cincinnati,  and  about 
twenty  other  more  or  less  important  centers,  where  it  is 
graded  and  classified  and  where  the  manufacturers,  the 
merchants,  or  the  buying  agents,  the  speculators,  the  ex- 
porters, the  factors  or  commission  merchants,  and  others 
compete  on  the  cotton  exchanges  for  their  supplies.  The 
distribution  is  made  still  more  complex  by  the  cotton 
exchanges  and  boards-of-trade,  the  members  of  which, 
through  the  sale  of  future  contracts,  spot  contracts,  short 
selling,  and  other  forms  of  dealing  pass  the  rights  to  the 
cotton  from  party  to  party  until  it  finally  enters  the  mill. 
The  average  producer  is  the  least  important  factor  in  the 
distribution  and  marketing  of  the  crop.  He  grows  the 
cotton,  is  obliged  to  sell  it  as  soon  as  it  is  harvested  and 


Cooperation  185 

ginned  to  satisfy  his  credit  demands,  and  there  his  relation 
to  it  usually  ends. 

The  Dissatisfaction  of  the  Cotton  Farmer 

The  cotton  farmer  has  not  been  satisfied  with  his  re- 
lation to  the  cotton-distributing  system.  A  few  years 
ago  the  price  of  cotton  was  more  or  less  depressed,  and  this 
condition  was  charged  to  the  manipulations  of  the  various 
middlemen  through  whose  hands  the  crop  passes.  It 
was  charged  also  to  a  relative  overproduction.  The 
farmer  who  has  had  to  sell  his  crop  as  soon  as  it  is  baled 
has  been  in  a  helpless  condition,  and  as  long  as  he  depended 
on  the  local  merchant  or  the  cotton  factor  for  credit  he 
could  not  disentangle  himself.  The  farmers  have  there- 
fore organized  into  associations,  they  have  built  ware- 
houses in  which  to  store  the  cotton  until  it  can  be 
marketed  favorably,  and  they  have  federated  these  ware- 
houses into  larger  selling  agencies.  Because  of  the  secu- 
rity that  the  cotton  in  the  warehouse  furnishes,  they  have 
been  able  to  obtain  money  through  regular  banking  chan- 
nels, and  they  have  attempted  to  influence  the  total  pro- 
duction of  cotton  by  reducing  the  acreage  grown  by  each 
member. 

The  Farmers'  Union 

The  most  important  efforts  along  the  lines  described 
have  been  made  by  the  Farmers'  Educational  and  Co- 
operative Union  of  America,  usually  known  as  the  "Farm- 
ers' Union,"  and  the  "Southern  Cotton  Association," 
although  the  latter  organization  is  no  longer  active. 

The  Farmers'  Union  is  a  national  body  with  3,000,000 


186  Cooperation  in  Agriculture 

members,  with  an  organization  in  each  state  in  which  it 
operates,  with  subsidiary  county  organizations  and  still 
smaller  subdivisions  called  "local  unions." 

The  Farmers'  Union  is  a  fraternal,  educational,  social, 
and  business  organization.  It  is  a  secret  organization  with 
signs  and  passwords.  It  adopts  a  legislative  program,  urg- 
ing that  Presidents,  Senators,  and  Supreme  Court  justices 
be  elected  by  direct  vote  of  the  people,  and  it  pushes  other 
reforms  which  it  believes  to  be  in  the  interest  of  the  people. 
Through  corporations  which  it  forms  it  operates  ware- 
houses, gins  and  fertilizer  plants,  purchases  supplies,  owns 
newspapers,  and  engages  in  other  business  enterprises. 

The  first  local  union  was  formed  in  Texas  in  1902,  the 
national  organization  was  formed  in  1905,  and  in  1909  it 
had  state  and  local  organizations  in  Alabama,  Arkansas, 
California,  Colorado,  Florida,  Georgia,  Idaho,  Illinois, 
Iowa,  Kansas,  Kentucky,  Louisiana,  Mississippi,  Missouri, 
Nebraska,  New  Mexico,  North  Carolina,  Oklahoma,  Ore- 
gon, South  Carolina,  Texas,  Virginia,  and  Washington. 

The  Charter.  —  The  principal  features  of  the  charter 
of  the  Faxmers'  Union  follow :  — 

1.  The  name  of  the  Corporation  shall  be  "The  Farmers' 
Educational  and   Cooperative   Union  of  America." 

2.  The  purpose  for  which  it  is  formed  is  to  organize  and 
charter  subordinate  Unions  at  various  places  in  Texas  and  the 
United  States  to  assist  them  in  marketing  and  obtaining  better 
prices  for  their  products,  for  fraternal  purposes,  and  to  cooper- 
ate with  them  in  the  protection  of  their  interests ;  to  initiate 
members  and  collect  a  fee  therefor. 

Principles  of  the  Union.  —  The  principles  of  the  Farmers' 
Union  are  set  forth  in  the  following  declaration :  — 


Cooperation  187 

Speculators  and  those  engaged  in  the  distribution  of  farm 
products  have  organized  and  operate  to  the  great  detriment  of 
the  farming  class. 

To  enable  farmers  to  meet  these  conditions  and  protect 
their  interests,  we  have  organized  the  Farmers'  Educational  and 
Cooperative  Union  of  America,  and  declare  the  following  pur- 
poses :  — 

To  establish  justice. 

To  seciu"e  equity. 

To  apply  the  Golden  Rule. 

To  discourage  the  credit  and  mortgage  system. 

To  assist  oiu"  members  in  buying  and  selling. 

To  educate  the  agricultural  class  in  scientific  farming. 

To  teach  farmers  the  classification  of  crops,  domestic  econ- 
omy, and  the  process  of  marketing. 

To  systematize  methods  of  production  and  distribution. 

To  eliminate  gambling  in  farm  products  by  Boards  of  Trade, 
Cotton  Exchanges,  and  other  speculators. 

To  bring  farmers  up  to  the  standard  of  other  industries  and 
business  enterprises. 

To  secm-e  and  maintain  profitable  and  uniform  prices  for 
grain,  cotton,  live-stock,  and  other  products  of  the  farm. 

To  strive  for  harmony  and  good  will  among  all  mankind  and 
brotherly  love  among  ourselves. 

To  garner  the  tears  of  the  distressed,  the  blood  of  martyrs, 
the  laugh  of  innocent  childhood,  the  sweat  of  honest  labor,  and 
the  virtue  of  a  happy  home  as  the  brightest  jewels  known,  m 

Membership  in  the  Union.  —  The  membership  in  the 
union  is  confined  to  farmers,  farm  laborers,  rural  me- 
chanics, rural  school  teachers,  physicians,  or  ministers  of 
the  gospel,  who  are  not  engaged  in  banking,  merchandizing, 
practicing  law,  or  belonging  to  any  trust  or  combine  for 
the  purpose  of  speculating  in  agricultural  products  or  the 
necessities  of  life,  or  directly  affecting  injuriously  the 


188  Cooperation  in  Agriculture 

agricultural  interests.     The  members  are  elected  by  ballot 
and  are  subject  to  blackball. 

A  State  Union  must  have  a  membership  of  5000  men 
before  a  charter  is  granted,  and  no  union  is  organized  with 
less  than  five  male  members.  The  National  Union  is 
composed  of  its  officers  and  one  delegate  for  each  five 
thousand  members  or  majority  fraction  thereof.  The 
constitution  declares:  "The  National  Union,  when  as- 
sembled, shall  adopt  and  declare  minimum  prices  on  all 
farm  products  which  may  be  sufficiently  in  control  of  the 
membership  to  give  reasonable  grounds  for  hoping  to 
maintain  said  prices."  The  National  Union  has  com- 
mittees on  minimum  price  on  both  short  and  long  staple 
cotton  and  on  various  other  products  which  its  members 
produce.  It  does  not  dictate  the  policy  of  the  state  and 
local  unions.  It  makes  recommendations,  and  each  mem- 
ber is  morally,  though  not  legally,  bound  to  follow  the 
recommendations  made. 

Efforts  of  Growers  to  Reduce  the  Acreage  of  Cotton 

The  cotton  farmers  have  gone  to  greater  lengths  in 
endeavoring  to  influence  the  price  of  a  crop  than  any  other 
class  of  American  farmers.  In  1905  the  price  of  middling 
cotton  was  below  7  cents  per  pound.  The  President  of 
the  Southern  Cotton  Growers'  Protective  Association, 
Harvie  Jordan,  at  the  convention  in  New  Orleans  in  Janu- 
ary, 1905,  urged  that  the  acreage  be  reduced  as  a  means 
of  improving  the  conditions  in  the  cotton  trade.  In  this 
connection  Mr.  Jordan  said :  ^  — 

^  Report  of  the  Commissioner  of  Corporations  on  Cotton  Exchanges, 
f  &-1  V,  pp.  329-330. 


Cooperation  189 

"We  must  learn  to  market  the  crop  slowly,  regulating 
the  supply  to  meet  the  legitimate  demand ;  break  up  the 
power  of  the  speculator,  and  take  care  of  the  people  our- 
selves. 

"The  bankers  of  the  South  must  stand  behind  the  pro- 
ducers in  this  fight,  and  let  the  whole  world  understand 
that  the  South  can  and  will  control  the  sale  of  her  products 
in  the  face  of  all  the  combinations  that  may  be  brought 
against  her.  We  must,  and  will,  reduce  the  present  cot- 
ton acreage  from  25  to  40  per  cent  on  every  cotton  farm 
in  the  South  for  1905. 

"We  must,  and  will,  curtail  the  use  of  commercial  fer- 
tiUzers  under  cotton  correspondingly  with  the  percentage 
of  reduction  in  acreage. 

"Instead  of  planting  32,000,000  acres,  as  in  1904,  plant 
not  more  than  24,000,000  acres,  and  make  this  year  not 
more  than  8,500,000  or  9,000,000  bales.  This  course, 
if  pursued,  would  enable  the  present  unsold  crop  to  sell 
for  a  reasonable  price,  and  assure  the  crop  of  1905  to  be 
profitable. 

"The  farmer  who,  under  existing  conditions  and  in  the 
face  of  the  great  financial  peril  which  confronts  the  South, 
deliberately  refuses  to  materially  reduce  his  cotton  acreage 
and  increase  his  food-supply  crops  is  an  enemy  to  himself 
and  a  traitor  to  his  country. 

"The  merchant  or  banker  who  will  deliberately  furnish 
supplies  or  money  to  any  man  to  plant  an  extended  acre- 
age in  cotton  this  year  deserves  the  deepest  condemnation 
and  literal  ostracism  of  the  entire  community  in  which 
they  do  business." 

The  sentiments  expressed  by  Mr.  Jordan  were  adopted 


190  Cooperation  in  Agriculture 

by  the  convention,  and  it  further  urged  all  growers  to 
hold  their  cotton  "until  the  government  reports  on  acre- 
age show  to  the  world  that  Southern  cotton  farmers  stand 
solidly  together,  that  they  have  complied  with  their  agree- 
ment, and  demand  the  value  of  their  product."  Follow- 
ing this  agitation  the  acreage  of  cotton  in  1905-1906  was 
reduced  to  26,999,552,  from  31,370,371  acres  in  1904-1905, 
while  the  price  was  raised  from  8.85  cents  per  pound  in 
1904-1905  to  11.07  cents  in  1905-1906.^ 

The  Farmers'  Union  also  favored  the  reduction  in  the 
acreage  of  cotton,  though  this  reduction  has  not  been  so 
aggressively  pushed  by  that  organization.  The  Presi- 
dent of  the  union,  however,  in  the  spring  of  1908  issued  a 
circular  ^  in  which  he  urged  the  members  each  to  plow 
up  from  one  to  ten  acres  of  cotton  on  the  15th  of  May  and 
plant  peas. 

The  Maintenance  of  Prices   by  Organizations  of  Cotton 
Producers 

The  Farmers'  Union  has  endeavored  to  maintain  the 
price  of  cotton  by  naming  the  minimum  price  below  which 
the  members  shall  not  sell  and  by  constructing  a  chain  of 
warehouses  in  which  the  cotton  can  be  stored,  and  which 
shall  be  an  aid  in  financing  the  members.  In  1904,  a 
minimum  price  of  10  cents  was  named  ;^  in  1905,  a  minimum 
of  10  cents  per  pound,  basis  middling,  at  interior  points, 
and  this  was  later  raised  to  11  cents ;  in  1906-1907,  a  mini- 
mum of  11  cents  per  poimd  was  named;  in  1907-1908,  a 

*  Report  of  the  Commissioner  of  Corporations,  p.  333. 
« Ibid.,  pp.  336-337. 
*Ibid.,  p.  340. 


Cooperation  191 

minimum  of  15  cents  at  interior  points ;  and  in  1908-1909,  a 
minimum  of  12  cents.  Similar  efforts  were  made  to  main- 
tain the  price  of  cotton  by  the  Southern  Cotton  Associa- 
tion during  its  active  existence. 

The  Farmers'  Union  has  1600  warehouses  in  the  cotton 
states  in  which  a  small  fraction  of  the  total  cotton  crop 
is  stored.  These  warehouses  are  usually  organized  as 
separate  corporations  or  in  unincorporated  form.  They 
are  built  so  that  the  members  can  store  their  cotton  until 
the  minimum  price  is  reached.  They  are  used  also  to 
facilitate  loans  on  the  stored  cotton  as  collateral,  the  ware- 
house company  being  able  to  secure  more  favorable  credit 
terms  than  the  individual  members  can  obtain.  The 
union  is  now  endeavoring  to  consolidate  the  various 
warehouses  in  the  states  under  central  companies,  which 
act  as  agents  for  the  local  warehouses  in  marketing  the 
crop.  The  warehouses  in  Mississippi  are  brought  to- 
gether in  a  million-dollar  corporation  ^  and  this  has  been 
joined  by  the  Tennessee  warehouses. 

The  Effect  of  the  Farmers'  Organization  on  the  Price  of 

Cotton 

The  Farmers'  Union  has  been  severely  criticized  as  an 
organization  which  restricts  competition  and  is  in  restraint 
of  trade,  and,  therefore,  contrary  to  the  "Sherman  Anti- 
trust Law."  On  this  point  the  Commissioner  of  Corpora- 
tion says : ^  — 

"Owing  to  the  multitude  of  causes  affecting  prices  of 

1  Testimony  of  T.  J.  Brooks,  Report  of  the  Committee  on  Interstate 
Commerce,  vol.  11,  p.  2340. 
« Ibid.,  pp.  29-31. 


192  Cooperation  in  Agriculture 

cotton  it  is  exceedingly  difficult  to  determine  the  effect 
of  any  specific  cause,  and  anything  like  a  precise  measure- 
ment of  such  effect  is  impossible.  Thus,  in  the  case  of 
the  Farmers'  Union  there  is  absolutely  no  means  of  de- 
termining to  what  extent  the  time  of  selUng  or  the  price 
received  by  the  producer  was  affected  by  the  action  of 
the  union  in  recommending  the  minimum  price.  It  fol- 
lows that  it  is  not  only  impossible  to  tell  whether  individual 
producers  gained  or  lost  as  a  result  of  this  minimum-price 
policy,  but  also  whether  the  course  of  prices  was  at  all 
influenced  by  that  policy. 

"  For  instance,  in  the  season  1906-1907,  the  Farmers' 
Union  named  a  minimum  price  of  11  cents ;  in  September 
of  that  year  middling  cotton  in  New  Orleans  was  quoted 
at  about  9|  cents.  It  advanced  in  October  to  above 
11  cents,  and  during  most  of  the  period  from  October 
to  May  the  price  fluctuated  between  10^  and  11  cents, 
while  still  later  in  the  season  it  advanced  to  over  13  cents. 
This  does  not  necessarily  mean  that  the  price  policy  of 
the  Farmers'  Union  was  the  dominating  influence  in  this 
advance.  In  1906-1907  the  demand  for  cotton  was  ex- 
ceedingly active. 

"In  the  season  1907-1908  the  Farmers'  Union  recom- 
mended a  minimum  of  15  cents  per  pound,  whereas,  except 
in  September  (when  the  New  Orleans  price  touched  13.56 
cents),  the  price  of  middling  at  New  Orleans  in  this  sea- 
son never  exceeded  12^  cents,  and  frequently  fell  below 
11  cents,  and  at  times  below  10  cents.  On  the  other 
hand,  in  this  season  there  occurred  the  panic  of  1907, 
while  other  causes  operated  to  counteract  the  efforts  of 
the  Farmers'  Union.     While,  therefore,  a  comparison  of 


Cooperation  193 

the  price  of  middling  cotton  at  New  Orleans  with  the 
minimum  price  recommended  by  the  union  in  that  year 
might  suggest  an  absolute  failure  of  the  minimum-price 
policy,  it  is  not  possible  to  say  that  such  was  the  case,  for 
the  reason  that  it  cannot  be  determined  whether  the  ac- 
tion of  the  union  did  not  prevent  the  price  from  going 
lower  than  it  otherwise  would  have  gone.  Statistics 
suggest  that  the  efforts  of  the  union  affected  the  movement 
of  the  crop  in  that  year. 

''  Warehouse  Policy  of  Farmers'  Union.  —  In  line  with 
its  recommendation  for  holding  cotton  for  minimum 
prices,  the  Farmers'  Union  has  entered  somewhat  ex- 
tensively upon  the  policy  of  constructing  and  operating 
warehouses  throughout  the  cotton  belt.  One  object  of 
this  policy  is  to  provide  means  for  storing  cotton  where 
it  may  be  held  for  a  rise  in  price.  There  is  no  official 
provision,  however,  which  compels  a  member  either  to 
deposit  his  cotton  in  such  a  warehouse  or  to  keep  it 
there  until  the  minimum  price  is  realized.  Another  object 
of  this  warehouse  scheme  is  to  facilitate  the  borrowing 
of  money  on  cotton  as  collateral. 

"A  large  number  of  warehouses  have  been  established 
by  union  members  in  different  localities.  It  was  estimated 
in  the  early  part  of  1909  that  there  were  at  least  1500  of 
these  local  warehouses.  Most  of  them,  however,  are  com- 
paratively small.  An  important  step  recently  contem- 
plated by  the  union  is  the  consolidation  of  these  various 
warehouses  into  consolidated  companies  in  the  respective 
states,  and  furthermore  the  consolidation  of  these  state 
consolidations  into  a  single  warehouse  company  or  the 
operation  of  these  state  consolidations  by  joint  control 


194  Cooperation  in  Agriculture 

under  union  auspices.  The  scheme  as  outlined  amounts 
to  a  combination  either  along  the  lines  of  the  trusts  of 
early  days  or  of  the  large  corporate  consolidations  of  the 
present  time.  As  such  it  must  be  regarded  as  another 
expression  of  the  operation  of  economic  forces  as  main- 
tained in  the  consolidation  movement  in  other  branches 
of  industry.  Should  this  movement  take  tangible  form, 
it  is  conceivable  that  the  consolidated  company  might 
control  enough  of  the  crop  to  make  the  union  a  factor 
of  decided  importance  in  regulating  cotton  prices.  At  the 
present  time,  however,  this  movement  is  in  such  a  prelimi- 
nary stage  that  its  ultimate  outcome  cannot  be  estimated. 

"Both  producers'  associations  have  been  criticized  by 
some  interests  in  the  cotton  trade,  particularly  the 
Farmers'  Union,  which  has  been  repeatedly  referred  to 
as  'a  farmers'  trust.'  Some  criticisms  of  the  union  are 
undoubtedly  deserved.  On  the  other  hand,  no  satis- 
factory conclusion  can  be  reached  because  of  the  complexi- 
ties of  the  situation.  Many  of  the  policies  of  the  two 
associations,  however,  are  reasonable  and  calculated  to 
benefit  the  cotton  trade.  Thus,  the  urging  of  producers 
to  practice  diversification  of  crops  is  wholly  commend- 
able, and  any  action  within  the  law  that  looks  to  an  im- 
provement in  the  condition  of  producers  is  not  justly  to 
be  criticized. 

"Many  of  the  severest  criticisms  of  the  Farmers'  Union 
have  come  from  spinners.  It  is  worth  noting,  therefore, 
that  just  as  this  report  goes  to  press  a  very  comprehensive 
movement  has  been  undertaken  by  spinners,  both  in  this 
country  and  abroad,  looking  to  a  material  reduction  in 
the  consumption  of  cotton  on  account  of  the  prevailing 


Cooperation  195 

high  prices.  The  exact  significance  of  this  movement 
cannot  be  stated  at  this  time,  but  apparently  the  curtail- 
ment contemplated  is  designed  to  be  of  sufficient  impor- 
tance to  affect  the  price  of  cotton." 

The  Commissioner  further  says:  "On  the  other  hand, 
attempts  to  fix  arbitrary  prices  for  the  crop  are  not  only 
ill  advised,  but  in  so  far  as  they  are  accompanied  by  con- 
certed action  or  agreement  are  open  to  the  same  criticism 
which  would  apply  to  similar  combinations." 

Economic  Mistakes  of  the  Cotton  Growers 

From  another  standpoint,  the  efforts  of  the  union  to 
reduce  production  by  restricting  the  use  of  commercial 
fertilizers  is  an  economic  mistake.  The  smaller  use  of 
fertilizer  is  followed  by  smaller  yields  per  acre,  which 
therefore  increase  the  cost  of  producing  the  cotton  per 
pound.  Low  yields  mean  high  unit  costs,  while  intensive 
tillage  usually  reduces  the  cost  of  production. 

The  reduction  of  the  acreage  by  the  cotton  farmer  is 
said  to  have  stimulated  the  efforts  of  the  European  spin- 
ners to  develop  cotton  production  in  Africa  and  other 
tropical  countries.  The  activities  in  the  German  spin- 
ners' association  and  the  English  spinners'  association 
were  stimulated  in  the  beginning  largely  by  the  fear  that 
the  American  cotton  supply  would  be  cut  off  from  Europe 
by  the  advent  of  the  boll  weevil,  by  the  development  of 
the  spinning  industry  in  America,  and  by  the  combina- 
tions of  American  growers. 

Looking  at  the  future  of  the  cotton  industry,  it  would 
seem  that  the  efforts  of  the  cotton  producers  to  reduce 
the  acreage  or  to  fix  a  minimum  price  are  superficial 


196  Cooperation  in  Agriculture 

remedies  for  the  unfortunate  condition  of  the  cotton 
farmer.  They  do  not  strike  at  the  root  of  the  Southern 
agricultural  situation.  The  fundamentals  needed  are  a 
more  diversified  crop  system,  smaller  farms  managed  by 
their  owners,  and  the  development  of  the  cooperative  sys- 
tem, with  local  unions  and  larger  federations  through  which 
the  producer  can  develop  a  comprehensive  system  of 
credit  and  a  system  of  distribution  and  marketing  between 
himself  and  the  spinner,  thereby  eliminating  the  costs  of 
the  present  complex  system  of  distribution,  giving  the  pro- 
ducer a  larger  share  of  the  price  which  the  spinner  pays 
for  the  cotton  and  placing  him  on  a  more  independent 
plane  of  citizenship. 


CHAPTER  VIII 

COOPERATION   IN    THE   HANDLING,    DISTRIB- 
UTING, AND  SALE  OF  FRUIT 

There  is  a  vital  power  behind  the  Western  fruit-grow- 
ers' associations  that  is  to  be  found  in  no  other  coopera- 
tive movement  in  the  United  States,  possibly  because  they 
have  the  greatest  diflEiculties  to  overcome.  The  class 
that  most  nearly  approaches  the  fruit-grower  is  the  grain- 
grower  of  the  Central  West,  who  was  forced  to  organize  the 
farmers'  elevators  for  protection  against  a  predatory  grain- 
marketing  system.  Some  cooperative  creameries  have 
been  formed  as  a  business  necessity,  but  more  often 
through  the  effort  of  the  agents  for  creamery  supplies. 
These  associations,  like  the  stallion  company  system,  have 
been  organized,  not  by  the  farmers,  but  by  those  who  de- 
sire to  sell  the  appliances  in  which  they  are  interested. 
The  fruit-growers'  associations  have  been  formed  in  order 
that  the  capital  invested  in  the  industry  might  be  pro- 
tected. The  growers  could  not  consign  their  products  to 
commission  merchants  two  thousand  miles  or  more  away ; 
they  could  not  depend  on  local  or  distant  buyers  to  pay  a 
fair  price  for  the  fruit ;  as  individuals  they  could  not  deal 
effectively  with  the  railroads  or  with  the  courts.  They 
had  to  organize  as  a  matter  of  necessity.  In  no  other 
way  could  their  industries  be  developed. 

197 


198  Cooperation  in  Agriculture 


THE   FRUIT-DISTRIBUTING    SYSTEM 

The  cost  of  distribution  of  the  fruit  crop  of  the  United 
States  from  the  producer  to  the  consumer  usually  equals 
about  one-half  of  the  price  which  the  consumer  pays 
for  the  product.  The  distribution  costs  include  the 
freight,  the  different  selling  charges  of  the  brokers,  job- 
bers, commission  merchants,  and  retail  dealers,  and  the 
various  local  distributing  charges.  Apples  that  bring 
the  producer  $2  a  barrel,  retail  at  the  rate  of  $4 
to  $8  per  barrel.  Lemons  that  cost  the  producer  seven 
to  eight  cents  a  dozen  to  grow,  cost  the  consumer  twenty 
to  thirty  cents  a  dozen,  the  producer,  the  transportation 
lines,  and  the  other  distributing  agencies  each  getting 
about  one-third  of  the  retail  price.  The  cost  of  distri- 
bution, if  excessive,  affects  the  profits  of  the  fruit-grower 
by  reducing  consumption  and  by  giving  him  a  small 
share  of  the  price  which  the  consumer  pays  for  the  fruit. 
The  conviction  has  been  growing  that  the  system  of  dis- 
tributing farm  products  has  become  so  complicated  and 
cumbersome  as  to  form  one  of  the  leading  factors  in  the 
increase  in  the  cost  of  living  and  in  reducing  the  profits 
of  the  producer  below  that  which  his  capital  and  labor 
warrant.  There  is  a  general  inquiry  into  the  cost  of 
distributing  food  products  in  the  United  States,  and  pro- 
ducers and  consumers  are  looking  into  the  methods  of 
farm  crop  distribution  more  critically  than  ever  before 
with  a  view  to  determining  how  these  charges  affect  the 
farmer's  interest  and  the  cost  of  living. 


Handling,  Distributing,  and  Sale  of  Fruit     199 

Agencies  of  DistribiUion 

The  fruit  crop  is  distributed  from  the  producer  to  the 
consumer  by  brokers,  jobbers,  fruit-distributing  and  mar- 
keting corporations,  soliciting  agents,  local  buyers,  com- 
mission merchants,  and  retail  traders  such  as  venders, 
fruit  stands,  market  places,  and  retail  stores.  The  dis- 
tributing facilities  also  include  the  transportation  lines 
over  which  the  produce  is  shipped,  the  auction  houses 
through  which  the  fruit  may  be  sold  to  the  jobber  and  to 
the  retail  trade,  the  market  places,  and  the  warehouses 
which  may  be  used  as  assembling  points  and  centers  of 
distribution.  There  is  a  wide  variation  in  the  mmaber  of 
steps  through  which  the  fruit  crop  has  to  pass  in  its  journey 
from  the  producer  to  the  consumer.  Occasionally  the 
producer  delivers  it  direct  to  the  consumer.  In  some  lo- 
calities, like  Philadelphia,  it  may  be  sold  through  a  public 
retail  market  where  the  consumer  buys  direct  from  the 
farmer  as  well  as  from  the  dealer.  The  system  grows  more 
complex  and  the  expenses  of  marketing  increase  when  the 
commission  merchant,  the  jobber,  the  local  and  traveling 
buyers,  and  salesmen,  general  merchants,  and  exporters 
are  added  to  the  scheme  of  distribution  and  marketing. 
It  becomes  bewildering  to  the  average  person  when  he 
finds  that  there  are  no  hard-and-fast  lines  which  separate 
any  of  these  agencies  from  another  and  that  their  func- 
tions overlap  or  may  be  identical.  Perhaps  the  scheme 
of  fruit  distribution  and  marketing  may  be  made  more 
clear  by  a  brief  description  of  the  several  agencies. 

The  Broker.  —  The  broker  is  an  agent  who  acts  between 
the  owner  of  the  fruit  and  the  jobber  in  placing  it  with 


200  Cooperation  in  Agriculture 

the  latter.  He  solicits  orders  from  the  wholesale  fruit 
trade  and  then  secures  the  fruit  from  the  producer  or 
from  a  local  buyer  to  fill  the  order,  receiving  a  brokerage 
commission  from  the  owner  of  the  fruit  for  handling  the 
transaction.  Sometimes  the  brokerage  is  paid  on  a  pack- 
age basis  with  a  bonus  in  addition.  The  fruit  broker  usu- 
ally handles  carload  lots  only.  He  is  not  supposed  to 
buy  or  sell  on  his  own  account,  and  he  places  the  fruit 
exclusively  with  the  wholesale  trade.  Some  of  the  brokers 
are  receivers  of  fruit,  and  sometimes  they  act  as  jobbers  as 
well.  Many  of  them  speculate  in  the  products  which 
they  handle  as  brokers.  There  are  many  brokers  who 
travel  and  who  sell  the  surplus  supplies  in  the  primary 
markets  to  the  outlying  trade.  The  broker  charges  from 
three  to  five  per  cent  on  the  gross  sales. 

Fruit-distributing  and  Marketing  Corporations.  —  A 
fruit-distributing  and  marketing  corporation  acts  as  a 
brokerage  agency  in  distributing  and  marketing  the  fruit 
of  growers  or  of  associations  of  growers  or  in  providing 
the  faciUties  through  which  they  may  distribute  their 
own  crops.  These  corporations  may  be  organized  by  the 
growers  on  the  cooperative  plan  and  operate  for  their 
members  at  cost,  or  they  may  be  formed  by  the  growers, 
by  the  trade,  or  jointly  as  stock  corporations  to  make  a 
profit  on  the  capital  invested  by  distributing  and  market- 
ing the  growers'  products  on  a  percentage  basis  or  on  a 
fixed  price  per  package. 

The  corporations  organized  for  profit  may  be  located 
at  the  point  of  production  or  in  the  centers  of  consumption. 
They  sell  the  fruit  for  the  growers  to  the  wholesale  trade 
for  cash  F.O.B.,  or  subject  to  inspection  on  arrival,  on 


o 


< 


Handling,  Distrihuting,  and  Sale  of  Fruit     201 

delivery  on  special  orders,  through  auction  companies, 
or  in  any  other  way.  As  a  rule,  these  corporations  are 
not  supposed  to  buy  and  sell  the  products  which  they 
handle  as  agents  for  their  clients,  though  in  practice  many 
of  them  do  act  as  buyers  and  commission  merchants  as 
well.  These  corporations  charge  from  five  to  ten  per  cent 
on  the  gross  sales. 

The  Jobber.  —  A  jobber  is  a  wholesale  fruit  dealer.  He 
buys  the  fruit  from  the  producer,  from  a  dealer,  or  through 
a  broker  and  sells  it  to  the  retail  trade.  In  a  given  trans- 
action one  jobber  may  intervene  between  the  producer 
and  the  retailer,  or  there  may  be  two  or  more  of  this  class 
of  middlemen,  including  the  traveling  solicitor,  the  local 
jobber,  or  the  local  merchant  who  may  act  as  a  broker  or  a 
jobber  and  through  whom  the  city  jobber  may  purchase 
his  supplies.  A  jobber  may  be  a  commission  merchant 
also,  many  of  the  jobbers  in  the  cities  acting  in  both 
capacities. 

The  Commission  Merchant.  —  A  commission  merchant 
is  an  agent  who  sells  fruit  for  the  owner  direct  to  the  stores, 
venders,  peddlers,  hotels,  and  other  retail  establishments  ; 
occasionally  he  may  sell  through  an  auction  company. 
He  sells  the  fruit  in  original  packages  in  the  quantities 
desired  by  the  trade.  He  receives  it  on  consignment  and 
charges  the  owner,  who  may  be  a  producer  or  a  local 
dealer,  a  commission  varying  from  five  to  ten  per  cent  on 
the  gross  sale  of  the  consignment,  though  the  commission 
varies  with  different  commodities  and  in  different  markets. 
A  commission  merchant,  strictly  as  such,  does  not  buy  or 
sell  on  his  own  account,  though  in  practice  there  are  few 
commission  merchants  in  the  United  States  who  are  not 


202  Cooperation  in  Agriculture 

jobbers  as  well.  A  recent  canvass  of  the  fruit  commission 
merchants  in  one  of  the  large  cities  developed  but  one  who 
was  not  a  dealer  in  the  products  which  he  was  handling 
for  other  people. 

The  Auction  Company.  —  An  auction  company  is 
formed  to  sell  produce  for  the  owner  or  his  representative 
to  the  jobber,  or  to  the  retail  trade,  the  buyers  purchasing 
it  in  open  competition.  The  auction  companies  may  be 
organized  independently,  but  are  usually  formed  by  mem- 
bers of  the  trade.  The  auction  company  may  be  located 
at  the  shipping  point,  or  in  the  cities  to  which  the  produce 
is  shipped.  Nearly  all  imported  fruit  is  sold  at  auction 
at  the  point  of  entry,  and  a  great  deal  of  the  fruit  of  the 
Pacific  coast  is  sold  in  this  manner  in  many  of  the  larger 
cities.  The  owner  of  the  fruit  is  charged  from  one  and 
one-half  to  five  per  cent  on  the  gross  sales.  The  auction 
company,  like  the  commission  merchant,  acts  as  an  agent 
for  the  owner  of  the  fruit  or  for  his  agent.  The  former 
sells  to  a  large  number  of  buyers  through  public  sale,  the 
latter  to  a  few  buyers  usually  at  private  sale.  The  auc- 
tion company  may  also  be  a  dealer  in  the  products  which 
it  sells  for  its  patrons.  It  may  be  engaged,  either  directly 
or  indirectly,  in  financing  its  clients,  in  handling  the  prod- 
ucts on  joint  accoimt  with  its  patrons,  or  in  the  purchase 
of  products  to  be  sold  in  competition  with  those  of  its 
clients.  Many  of  the  auction  companies  are  formed  by 
members  of  the  trade  who  may  either  sell  the  fruit  to 
themselves,  thereby  making  an  extra  profit  for  themselves 
through  the  sales,  or  the  company  may  be  an  open  auction 
and  sell  to  all  buyers.  In  some  companies  the  firms  who 
are  the  stockholders  act  as  agents  in  that  market  in  han- 


Handling,  Distributing,  and  Sale  of  Fruit     203 

dling  shippers'  accounts.  Under  these  conditions  members 
of  the  trade  who  are  not  stockholders  or  shippers  who  have 
agents  not  represented  by  the  stockholders  may  not  be 
able  to  buy  or  sell  through  the  auction,  because  the  sale 
of  the  fruit  may  be  manipulated  to  protect  the  stockholders 
and  to  discriminate  against  their  competitors.  In  one  of 
the  eastern  cities  all  of  the  members  of  the  wholesale  fruit 
trade  are  stockholders  in  an  auction  company  and  agree 
among  themselves  not  to  buy  except  through  auction  sales. 
This  arbitrary  attempt  to  restrict  the  sale  of  fruit  has 
resulted  in  keeping  the  better  grades  of  fruit  out  of  this 
market.  It  has  also  resulted  in  the  recent  indictment  of 
the  members  on  the  ground  that  the  combination  acts 
in  restraint  of  trade.  An  auction  company  in  a  small 
market  usually  results  in  an  artificial  condition  of  trade 
because  the  stockholders,  who  are  the  trade  itself,  can 
manipulate  the  condition  of  the  sales  in  such  a  way  as  to 
give  them  an  extra  profit. 

The  Warehouseman.  —  The  warehouseman  acts  as  a 
trustee  in  storing  products  for  his  clients  until  they  are 
sold.  He  is  a  part  of  the  system  of  distribution  of  the 
food  supplies  of  the  nation,  the  warehouses  serving  as 
reservoirs  in  equalizing  the  supplies  throughout  the  year. 
The  producer,  the  jobber,  the  commission  merchant,  or 
any  one  else  who  wishes  to  store  his  product  to  be  sold  at 
a  later  date,  contracts  with  the  warehouseman  for  space  in 
which  the  goods  are  stored.  The  warehouseman  is  in  a 
position  to  know  about  the  food  supplies  of  a  city  and  of 
the  amount  held  by  different  people  who  have  goods  in 
his  warehouse.  He  is  supposed  to  treat  everybody  alike 
in  so  far  as  his  relations  to  the  public  are  concemedj  and  he 


204  Cooperation  in  Agriculture 

is  not  supposed  to  deal  in  the  products,  which,  as  a  trustee, 
he  is  storing  for  other  people.  Many  of  the  warehouse- 
men of  the  United  States  are  dealers  in  the  products  which 
they  store.  They  frequently  finance  the  operations  of 
their  clients ;  they  buy  poultry,  butter,  eggs,  and  fruit  on 
joint  account  with  their  clients.  They  may  invest  in  the 
corporations  of  their  clients,  or  their  clients  may  be  in- 
terested in  the  warehouse  corporation,  or  they  may  buy 
and  sell  these  products  independently. 

The  Retail  Trade.  —  The  retail  dealers  sell  the  produce 
to  the  consumers.  They  may  buy  it  from  the  producer 
direct  or  through  brokers,  jobbers,  commission  men,  or 
auction  companies.  The  retail  trade  is  composed  of  a 
widely  variable  class  of  people,  including  the  stores,  the 
fruit  stands,  the  push-cart  men,  and  other  kinds  of  venders. 

These  are  the  principal  avenues  by  which  the  fruit 
trade  of  the  United  States  is  handled.  The  farmer  grows 
the  fruit  and  takes  all  the  risks  of  production.  He  sells 
it  to  a  local  merchant  or  buyer  or  through  a  broker  or  a 
commission  merchant.  The  return  which  he  receives  de- 
pends upon  his  skill  as  a  producer,  his  honesty  and  effi- 
ciency in  handling,  grading,  and  preparing  the  product 
for  sale  and  the  efficiency  and  honesty  of  these  different 
agencies  which  bridge  the  stream  between  him  and  the 
consumer.  The  responsibility  of  the  producer  usually 
ends  when  his  crop  is  ready  for  sale,  unless  he  develops  his 
own  distributing  system.  It  generally  terminates  at  the 
farm  or  at  the  local  railway  station,  where  the  crop  is  sold 
to  the  local  buyer  or  to  the  representative  of  a  distant 
buyer.  If  there  is  free  competition  among  the  buyers  and 
the  product  is  handled  fairly  by  the  agencies  mentioned, 


Handling,  Distributing,  and  Sale  of  Fruit     205 

the  producer  may  receive  a  fair  price  for  it.  If  the  prices 
are  artificially  fixed,  or  if  the  agencies  which  represent 
him  are  in  competition  with  him,  then  he  receives  only 
that  which  the  combination  is  willing  to  pay.  These 
different  agencies  strive  to  increase  the  use  of  fruit  so  that 
their  profits  may  be  increased.  They  have  agents  in  the 
field  to  secure  business,  and  agents  in  the  cities,  and 
traveling  agents  in  the  smaller  places  to  develop  trade. 
The  local  buyers,  the  jobbers,  and  the  brokers  push  their 
business  in  every  way  known  to  such  agencies,  though  no 
comprehensive  system  of  distribution  is  possible  under 
this  plan  of  farm-crop  marketing.  The  commission  mer- 
chants seek  to  enlarge  their  trade  by  soliciting  consign- 
ments from  the  producer  and  by  attracting  buyers  to  their 
stores.  The  auction  companies  develop  their  particular 
function,  while  the  retail  trade  encourages  the  consumer 
to  use  the  greatest  possible  amount  of  the  produce. 

The  fruit  trade  has  been  developed  through  the  activity 
and  competition  of  these  different  agencies.  They  have 
created  a  rapidly  increasing  demand  for  fruit  as  a  staple 
article  of  food  and  have  made  it  possible  for  the  producer 
to  develop  millions  of  acres  of  land  that  have  been  planted 
to  orchards  in  recent  years.  On  the  whole,  the  fruit  trade 
of  the  United  States  is  in  the  hands  of  men  of  integrity, 
business  energy,  and  resourcefulness.  In  these  respects 
they  equal  any  other  class  of  men  who  deal  in  the  products 
of  the  soil.  There  are  exceptions  to  this  rule,  as  there  are 
in  every  class  of  business,  and  dishonest  and  reprehensible 
practices  have  crept  into  the  brokerage,  jobbing,  com- 
mission, auction,  warehouse,  and  retail  trade  which  some- 
times throw  suspicion  on  the  entire  distributing  business. 


206  Cooperation  in  Agriculture 

The  fruit  trade  lends  itself  peculiarly  to  dishonest  prac- 
tices because  the  operations  of  these  agencies,  some  of 
which  are  of  a  semi-public  nature,  are  usually  unregulated 
by  law  and  because  the  return  which  the  producer  receives 
may  depend  entirely  on  the  honesty  and  business  integ- 
rity of  the  agent  who  handles  his  business. 

ABUSES  IN  THE  FRUIT  TRADE 

There  are  a  number  of  conditions  in  the  fruit  trade  as 
well  as  in  the  sale  of  other  farm  crops  which  affect  the  in- 
terests of  the  producer  adversely  and  which  he  is  powerless 
to  overcome  when  acting  alone.  A  broker  sometimes  acts 
as  a  jobber  also  and  sells  the  product  to  himself  to  be  sold 
later  at  a  higher  price,  thereby  dishonestly  returning  to 
the  producer  proceeds  below  the  value  of  the  fruit.  As  an 
example,  a  commission  firm  with  high  standing  in  the 
trade,  recently  contracted  to  act  as  a  brokerage  agent 
in  the  distribution  of  cantaloupes  for  associations  of 
growers.  The  firm  advanced  money  to  grow  the  crop 
and  furnished  seed  and  supplies  to  the  growers.  Many 
of  the  cantaloupes  were  sold  to  the  jobbing  trade,  others 
were  consigned  to  commission  houses,  while  others  were 
reported  sold  at  some  distant  point  at  a  low  price,  the 
agent  explaining  to  the  producer  that  the  fruit  arrived 
in  poor  condition  or  that  the  market  was  bad  in  other 
respects.  It  was  discovered  by  the  growers  that  many 
carloads  of  the  cantaloupes  actually  arrived  in  good  con- 
dition, that  they  were  bought  by  the  firm  who  was  acting 
as  their  agent  at  a  low  price,  and  that  later  they  were 
diverted  to  another  market  where  the  fruit  was  sold  at  a 
higher  figure.    The  revelations  following  these  dishonest 


Handling,  Distributing,  and  Sale  of  Fruit     207 

practices  caused  the  downfall  of  the  firm,  and  as  it  stood 
high  in  fruit-handling  circles,  its  dishonesty  caused  the 
producers  to  distrust  firms  of  similar  standing.  The 
practice  of  receiving  a  brokerage  from  the  jobber  as  well 
as  from  the  owner  of  the  fruit  for  whom  the  broker  acts, 
is  another  practice  which  acts  to  the  detriment  of  the 
producer  by  lowering  the  price  which  he  might  have  re- 
ceived for  his  product. 

One  of  the  most  serious  conditions  that  the  producer 
has  to  meet  is  the  frequent  agreement  among  buyers  to 
fix  a  maximum  price  to  be  paid  for  the  fruit.  This  is  not 
an  uncommon  practice  among  those  who  buy  fruit  in  the 
orchards  or  at  a  shipping  station.  Under  these  conditions 
all  of  the  fruit  is  sold  at  a  low  price,  and  the  grower  with 
unusually  fine  fruit  is  offered  the  same  price  as  the  grower 
having  fruit  of  medium  quality.  This  practice  among 
buyers  is  one  of  the  leading  factors  that  has  caused  the 
formation  of  the  cooperative  fruit-growers'  associations 
throughout  the  United  States.  In  other  instances  the 
buyers  divide  the  territory  among  themselves  and  pay 
similar  prices  to  the  growers  in  each  territory.  When 
these  conditions  exist,  competition  is  eliminated,  trade  is 
imnaturally  restrained,  and  the  producer  must  either  take 
the  price  offered  by  the  broker,  consign  his  fruit  to  a  firm 
which  may  also  be  a  buyer  of  the  same  product,  hold  it  for 
better  market  conditions  later  in  the  season,  or  else  unite 
with  other  producers  to  protect  his  interests.  The  pro- 
ducer's condition  is  still  further  complicated  by  the  jobbers 
when  they  contract  for  all  the  space  in  storage  plants  in 
the  large  cities,  and  further  still  when  the  warehouseman, 
either  directly  or  indirectly,  becomes  a  jobber  in  the  prod- 


208  Cooperation  in  Agriculture 

ucts  which  he  stores  as  a  trustee  for  these  people,  or  when 
they  form  trade  combinations  in  the  markets  through 
which  they  agree  on  a  maximum  price  to  be  paid  for  the 
produce. 

The  dishonest  commission  merchant  is  one  of  the  most 
serious  difficulties  that  the  producer  has  to  meet.  There 
are  few  lines  that  are  more  attractive  to  the  unscrupulous 
man  than  the  commission  business.  His  business  is  un- 
checked and  unregulated.  The  unscrupulous  merchant 
can  and  often  does  overquote  the  market  in  soliciting 
shipments,  and  he  returns  to  the  producer  as  much  or  as 
little  as  he  pleases,  with  small  chance  of  having  his  dis- 
honesty discovered.  There  are  many  commission  mer- 
chants who  have  built  up  enviable  reputations  for  business 
integrity.  The  National  League  of  Commission  Mer- 
chants endeavors  to  eliminate  dishonest  practices  from  the 
commission  trade,  but  on  account  of  the  unlimited  oppor- 
tunity for  fraudulent  dealing,  the  commission  business 
attracts  an  unusually  high  proportion  of  unscrupulous 
dealers.  These  men  have  cast  discredit  and  suspicion  on 
the  entire  commission  business  which  has  led  to  a  growing 
demand  that  the  operations  of  the  commission  merchants, 
as  well  as  those  of  other  semi-pubhc  distributing  and 
marketing  agencies  who  handle  produce  entering  inter- 
state commerce,  shall  be  subject  to  federal  regulation,  and 
that  the  states  and  local  authorities  shall  prescribe  the 
conditions  under  which  these  different  agents  who  conduct 
an  intra-state  business  shall  transact  their  operations. 

A  still  more  serious  difficulty  lies  in  the  fact  that  most 
of  the  commission  firms  are  also  jobbers  in  the  products 
which  they  handle  on  commission  for  the  public.     In  that 


Handling,  Distributing,  and  Sale  of  Fruit     209 

capacity  the  commission  merchant  is  a  competitor  of  the 
growers  for  whose  interests  he  is  acting  as  an  agent.  It 
is  a  common  practice  for  the  commission  merchant  who 
receives  apples  on  consignment  to  transfer  them  to  his 
own  accomit  at  a  low  price.  He  then  becomes  a  jobber 
and  a  speculator.  He  holds  the  fruit  for  a  few  days  or 
weeks  in  storage  and  sells  it  at  an  advanced  figure.  This 
practice  is  justified  by  many  commission  merchants  on 
the  score  that  the  fruit  is  purchased  at  the  prevailing  mar- 
ket value.  The  practice,  however,  is  open  to  the  most 
flagrant  abuses,  and  a  shipper's  interest  is  the  first  to  suffer 
when  it  comes  into  competition  with  the  investment  of 
the  commission  merchant  in  the  capacity  of  a  jobber. 
This  dual  capacity  of  the  commission  merchant  and  other 
agencies  of  distribution,  next  to  the  making  of  dishonest 
returns,  is  the  cause  of  more  distrust  on  the  part  of  the 
producer  than  any  one  abuse  in  the  fruit  trade.  The 
feeling  is  growing  that  as  a  matter  of  public  policy  no 
individual  or  firm  which  acts  as  an  agent  for  the  producer 
ought  to  have  the  legal  right  to  speculate  in  the  same 
produce.  These  agencies  are  charged  with  protecting  the 
interests  of  their  clients,  but  no  agent  can  discharge  his 
duties  faithfully  where  his  own  product  comes  in  direct 
competition  with  the  product  of  his  client. 

A  flagrantly  dishonest  practice  that  is  sometimes  fol- 
lowed by  commission  firms  is  the  repacking  of  the  product 
into  more  packages  than  the  original  consignment  con- 
tained. Potatoes  are  sometimes  taken  from  the  sacks, 
a  seam  sewed  across  the  bottom  in  such  manner  that  six 
of  the  original  sacks  fill  seven.  Oranges  are  sometimes 
repacked  so  that  ten  boxes  received  from  the  shipper  fill 


210  Cooperation  in  Agriculture 

twelve  boxes;  other  products  are  treated  in  a  similar 
manner.  The  producer  receives  returns  on  the  number 
of  boxes  originally  shipped,  the  excess  due  to  the  repack- 
ing going  to  the  merchant.  The  merchant  often  justifies 
the  practice  on  the  ground  that  he  has  been  forced  by  busi- 
ness competition  into  methods  that  he  himself  condemns. 
It  is  not  an  uncommon  practice  for  the  commission  mer- 
chants in  some  cities  to  repack  peaches  from  one-fifth 
Climax  baskets  into  one-sixth  Climax  baskets.  Formerly 
when  the  peck  basket  was  the  standard  size,  the  commis- 
sion merchants  repacked  the  peaches  in  baskets  holding 
a  fifth  of  a  bushel.  This  practice  finally  led  the  Michigan 
peach-growers  to  adopt  the  fifth  bushel  as  the  standard 
size.  The  merchants  then  reduced  the  size  into  which 
the  fruit  was  repacked  to  a  sixth  of  a  bushel.  The  result 
of  these  practices  is  that  the  producer  pays  proportionally 
more  for  the  small  empty  package,  — it  costs  more  for  pack- 
ing, handling,  and  for  freight,  —  while  the  relative  value 
of  the  fruit  remains  as  it  was  before. 

A  difficulty  that  frequently  affects  the  shippers'  interest 
is  the  absence  of  free,  open  competition  in  some  of  the 
auction  markets.  When  every  buyer  and  shipper  has 
equal  rights  in  the  auction,  this  system  of  crop  sale  may  be 
an  advantage  both  to  the  shipper  and  to  the  buyer  of 
fruit  in  the  large  cities.  But  all  auction  sales  in  the  United 
States  are  not  handled  in  this  manner,  especially  in  the 
smaller  markets.  Instead  of  operating  as  semi-public 
agents  for  all  shippers  and  buyers,  some  of  these  com- 
panies are  formed  by  the  trade  for  the  purpose  of  con- 
trolling the  sale  of  fruit  in  one  or  more  cities  in  the 
interest  of  the  buyers  who  are  the  stockholders,  or  in 


Handling,  Distributing,  and  Sale  of  Fruit     211 

the  interest  of  the  shippers  whose  agents  are  the  stock- 
holders. Under  these  conditions  an  auction  company  has 
the  power  of  discriminating  unjustly  against  both  the 
shipper  and  the  buyer,  and,  when  left  unregulated  by  the 
state  or  federal  authorities,  may  operate  as  a  predatory 
organization  in  the  restraint  and  control  of  trade.  At  the 
present  time  it  is  impossible  for  many  shippers  to  sell 
their  produce  through  the  auctions  in  some  of  the  cities 
unless  they  employ  a  commission  firm  or  other  dealer  who 
is  a  stockholder  in  the  auction  company  to  act  as  their 
broker  in  that  particular  market. 

The  American  farmer  cannot  afford  to  occupy  a  posi- 
tion where  the  returns  for  his  labor  and  capital  are  de- 
pendent on  the  unregulated  action  of  the  agencies  that 
distribute  the  products  of  the  farm.  To  protect  him 
against  the  abuses  of  the  transportation  companies,  the 
federal  and  state  governments  have  passed  laws  and  have 
prescribed  rules  and  regulations  governing  the  charges 
which  these  companies  may  exact  and  the  methods  of 
conducting  their  business  operations.  When  left  unregu- 
lated, they  failed  to  protect  the  interests  of  the  people. 

There  is  an  increasing  demand  on  the  part  of  the  public 
that  similar  restrictions  should  be  prescribed  by  the  federal 
government,  by  the  states  and  by  municipaUties  as  regards 
those  who  act  as  semi-public  agents  in  the  distribution 
and  marketing  of  the  nation's  food  supplies.  In  some 
states  they  are  demanding  an  official  inspection  of  the 
product  on  arrival  and  that  these  semi-public  agents 
should  be  obliged  to  keep  their  records  uniformly  and  in 
such  manner  that  they  are  always  open  to  the  authorities 
and  to  any  one  who  has  a  proper  reason  for  inspecting 


212  Cooperation  in  Agriculture 

them.  The  farmer  as  an  individual  is  helpless  in  meeting 
these  conditions  alone.  Unregulated  competition  has 
utterly  failed  to  correct  the  abuses  of  the  food-distrib- 
uting system.  Reasonable  regulation  of  the  semi-public 
agencies  of  distribution  and  sale  by  local  authorities  and 
by  the  state  and  federal  governments,  and  organization 
among  the  farmers  to  improve  the  methods  of  handling, 
packing,  distributing,  and  selling  their  products  will  help 
solve  these  difficulties  and  will  benefit  every  one  who 
is  honestly  engaged  in  the  distribution  and  sale  of  the 
nation's  food  supplies.  In  order  to  bring  about  a  better 
condition  in  the  handling  of  food  supplies  and  to  reduce 
the  cost  of  living,  it  is  recommended  by  the  Committee  on 
Markets,  Prices,  and  Costs  of  the  New  York  State  Food 
Investigating  Commission  ^  — 

"That  the  Charters  of  the  various  cities  of  the  State 
be  amended  so  as  to  provide  for  Departments  of  Markets 
charged  with  the  economic  and  sanitary  supervision  of 
food  supplies  used  in  the  municipalities. 

"That  the  primary  or  wholesale  prices  should  be  fixed 
by  systematic  auction  sales  in  lots  suitable  for  purchase 
by  retailers,  conducted  under  the  auspices  of  the  City  or 
of  a  public  organization,  not  for  profit,  in  which  all  parties 
interested  should  have  a  voice,  constituting,  on  primary 
prices,  a  producers'  and  consumers'  market." 

THE   HANDLING   OF  THE   FRUIT   CROP   BY   COOPERATIVB 
ASSOCIATIONS 

The  fruit-growers  of  the  United  States  need  to  organize 
cooperatively  to  bring  about  a  better  handling,  grading, 

1  Report,  August  1,  1912. 


Handling,  Distributing,  and  Sale  of  Fruit     213 

and  packing  of  their  products,  and  to  increase  the  effi- 
ciency in  their  distribution  and  sale.  There  is  an  enor- 
mous loss  in  the  annual  value  of  the  fruit  crop  as  a  result 
of  bad  physical  handling  in  preparing  it  for  market.  It  is 
probably  not  overstating  it  to  say  that  there  is  an  average 
loss  of  not  less  than  twenty  per  cent  from  this  cause  in 
picking,  hauling,  grading,  and  packing  and  preparing  the 
fruit  for  shipment.  The  bruising  of  the  fruit  detracts 
from  its  appearance,  and  where  the  skin  is  punctured  it 
makes  it  susceptible  to  decays  that  cannot  enter  a  healthy, 
imbroken  skin.  This  enormous  annual  economic  loss  can 
be  prevented  by  following  a  few  simple  conservation 
methods. 

Bad  Handling  and  the  Fruit-Rots 

The  common  soft-rot  of  apples,  peaches,  small  fruits, 
and  citrus  fruits  is  usually  caused  by  molds  that  gain  en- 
trance through  abrasions  in  the  skin  or  when  the  fruit  is 
physiologically  weakened.  An  unbroken  skin  is  resistant 
to  these  fungi,  but  when  the  skin  is  broken  the  decay  de- 
velops rapidly  if  there  are  present  moisture  and  heat 
enough  to  germinate  the  spores  of  the  fungi  and  start 
them  into  growth.  Few  have  any  idea  of  the  amount  of 
fruit  that  is  lost  by  improper  handling.  It  is  not  un- 
common to  find  twenty  per  cent  of  the  apples  in  a  con- 
signment with  punctures  through  the  skin.  In  cherry 
picking,  the  flesh  around  the  stem  is  frequently  broken. 
With  small  fruits  careless  pickers  often  injure  one-half  of 
the  berries.  Twenty-five  per  cent  of  the  peaches  are  fre- 
quently injured.  In  citrus  fruits  the  abrasions  may  vary 
from  five  to  seventy-five  per  cent  caused  by  the  clippers 


214  Cooperation  in  Agriculture 

in  cutting  the  oranges  or  lemons  from  the  tree,  by  punc- 
tures from  stems  that  have  been  cut  too  long,  by  gravel 
in  the  picking  boxes,  or  twigs  in  the  sacks,  by  the  finger 
nails  of  the  pickers,  and  by  various  factors  in  the  packing- 
house. The  mechanical  injuries  often  result  from  igno- 
rance, carelessness,  or  improper  supervision  of  the  labor. 
They  are  generally  found  in  fruit  handled  by  labor  that  is 
paid  by  the  bushel,  sack,  or  package — a  system  that  places 
a  premium  on  the  quantity  rather  than  the  quality  of  the 
work  performed.  Among  different  pickers  working  side 
by  side,  one  laborer  may  pick  the  fruit  perfectly,  while 
another  injures  seventy-five  per  cent ;  and  comparing  the 
fruit  of  ten  individual  growers,  the  amount  of  injury  in 
the  product  of  each,  taken  as  a  whole,  may  show  an  equally 
wide  variation. 

The  careful  handling  of  fruit  is  an  art  that  is  not  ac- 
quired by  the  average  fruit-grower,  it  is  not  commonly 
acquired  by  the  laborer,  and  it  is  seldom  developed  unless 
the  business  of  the  growers  is  organized  so  as  to  insure 
the  careful  handling  of  the  product  as  a  whole.  The  phys- 
ical injuries  that  result  from  handling  are  the  most  serious 
where  each  grower  in  an  association  picks  and  handles 
his  own  fruit.  It  is  least  where  they  are  organized  so  that 
careful  handling  methods  can  be  universally  applied  as  a 
part  of  the  fruit-handling  system.  Cooperation  is  the 
only  method  by  which  the  fruit  of  all  the  growers  of  a 
conununity  can  be  handled  with  similar  care.  Through 
the  cooperative  organization  a  system  of  inspection  can  be 
inaugurated,  an  educational  campaign  vigorously  pro- 
moted, and,  when  practical,  the  orchards  of  the  members 
can  be  harvested  and  the  fruit  graded  and  packed  by 


Handling,  Distributing,  and  Sale  of  Fruit     215 

trained  gangs  of  laborers  working  under  the  control  of 
the  association. 

Cooperation  in  the  Harvesting  of  Fruit 

In  the  citrus  fruit  industry  in  California  a  large  propor- 
tion of  the  oranges  and  lemons  grown  by  12,000  to  15,000 
farmers  are  picked,  graded,  and  packed  by  labor  working 
under  the  control  of  cooperative  associations.  The  phys- 
ical handling  of  the  fruit  is  thereby  standardized.  For- 
merly the  individual  member  of  the  association  picked 
his  own  fruit  and  delivered  it  to  the  packing-house.  It  was 
pooled  with  the  fruit  of  the  other  members.  One  grower 
would  deliver  his  fruit  to  the  packing-house  with  an  aver- 
age of  three  per  cent  physically  injured;  another  with 
equally  good  fruit,  but  handling  it  carelessly,  would  in- 
jure fifty  per  cent  of  his  oranges  in  picking.  The  abra- 
sions in  the  skin  being  too  small  to  be  seen  readily,  the  fruit 
of  similar  grade  of  both  growers  was  mixed  and  sold  in  a 
pool.  A  car  containing  part  of  the  first  member's  fruit 
would  arrive  in  Boston  in  sound  condition,  while  a  car 
containing  a  part  of  the  fruit  of  the  latter  might  develop 
twenty  per  cent  decay  in  transit.  The  first  grower  was  the 
loser  and  the  second  was  the  gainer  under  this  condition. 
Before  the  nature  of  the  citrus  fruit  decays  was  understood, 
damage  claims  were  usually  filed  against  the  railroads  to 
cover  the  loss  from  decay,  the  shipper  thinking  that  the 
loss  was  due  to  the  improper  handling  of  the  refrigerator 
cars  while  in  transit.  The  merchant  who  bought  the 
latter  member's  fruit  was  dissatisfied,  and  so  was  the 
consumer,  who  may  have  received  one  or  two  decayed 
oranges  in  the  dozen  for  which  he  paid  fifty  cents.     De- 


216  Cooperation  in  Agriculture 

cayed  fruit  is  demoralizing  to  the  fruit  industry.  The 
losses  from  decay  formerly  cost  the  citrus  growers  of  Cali- 
fornia from  three-quarters  of  a  million  to  a  million  and  a 
half  dollars  annually,  most  of  which  was  preventable.  In 
1911  the  claims  for  decay  and  all  other  kinds  of  damage 
by  the  railroads  was  less  than  one  per  cent  of  the  F.O.B. 
value  on  cars  handled  by  one  organization  through  which 
was  distributed  more  than  sixty  per  cent  of  the  entire 
citrus  crop. 

The  Remedy  for  Decay  in  Citrus  Fruits 

The  causes  of  decay  in  the  citrus  fruits  of  California 
were  determined  through  the  work  of  the  United  States 
Department  of  Agriculture.  The  department  showed  ^ 
that  the  underlying  cause  of  decay  was  carelessness  in 
picking  and  handling  the  fruit  and  that  the  system  of 
fruit  handling  as  practiced  in  California  and  in  other 
states  put  a  premium  on  careless  work.  It  was  suggested 
by  the  department  that  the  picking  of  the  fruit  be  done 
by  the  associations  rather  than  by  the  individual  members 
in  order  that  the  physical  handling  might  be  standardized. 
Gangs  of  labor  were  then  organized  by  the  associations, 
and  each  gang  was  placed  in  charge  of  a  capable  foreman. 
The  pickers  were  paid  by  the  day  rather  than  by  the  box, 
and  the  fruit  of  fifty  members  was  thereby  handled  with 
the  same  degree  of  care  that  the  careful  individual  grower 
bestowed  on  the  harvesting  of  his  crop.  Commercially 
speaking,  the  decay  in  citrus  fruit  handled  in  this  manner 
was  practically  eliminated,  an  enormous  saving  was  ef- 

*  The  Decay  in  Oranges  while  in  Transit  from  California,  Btilletin  123, 
Bureau  of  Plant  Industry,  G.  Harold  Powell  and  associates. 


Handling,  Distributing,  and  Sale  of  Fruit     217 

fected  to  the  industry,  the  relations  between  the  shippers 
and  transportation  companies  were  improved,  the  whole- 
sale dealers  paid  higher  prices  for  the  fruit,  the  retailers 
could  charge  the  consumer  a  lower  price  because  all  the 
fruit  was  sound,  and  a  better  feeling  in  general  pervaded 
every  branch  of  the  industry.  But  this  is  not  all.  The 
better  handling  of  the  fruit  by  the  cooperative  organiza- 
tions quickened  the  cooperative  spirit  among  the  fruit- 
growers. The  trees  of  the  members  are  now  often  fumi- 
gated by  the  associations,  or  by  cooperative  fumigation 
associations,  and  spraying  is  often  done  in  the  same  way. 
Protection  of  the  orchards  against  frost  is  sometimes 
handled  in  the  same  way.  In  some  cases  pruning  is  done 
by  the  associations,  and  every  operation  that  the  associa- 
tions perform  is  done  better  than  it  ever  was  before.  In 
an  unorganized  agricultural  industry  it  is  impossible  to 
bring  about  a  reform  of  this  kind.  The  average  individual 
grower  cannot  handle  such  a  question  alone.  If  properly 
managed,  the  association  raises  the  economic  efficiency  of 
a  community  because  it  can  apply  methods  to  the  opera- 
tions of  all  the  growers  that  can  only  be  applied  by  the 
exceptional  grower  who  works  by  himself. 

The  harvesting  of  fruit  by  an  association  is  not  practical 
in  all  kinds  of  fruit-growing.  In  the  quick-ripening  sum- 
mer fruits,  the  method  is  too  cumbersome.  In  apple- 
growing  it  may  be  applied  if  the  association  can  find  com- 
petent foremen  to  handle  the  labor.  If  the  association 
cannot  harvest  the  fruit,  it  can  adopt  rules  of  picking  to  be 
followed  by  each  member,  and  it  can  enforce  these  rules 
through  inspectors  whose  duty  it  is  to  inspect  the  picking 
and  handling  operations  on  each  farm  and  by  a  rigid  in- 


218  Cooperation  in  Agriculture 

spection  of  the  fruit  when  it  is  delivered  by  the  member 
to  the  association  at  the  railroad  station,  warehouse,  or 
other  assembling  point.  These  inspectors  are  an  invalu- 
able educational  force  in  a  community  of  fruit-growers  just 
as  the  Danish  dairy  inspectors  who  test  the  cows  of  each 
member  of  an  association  and  who  give  advice  in  other 
matters  have  been  among  the  most  potent  factors  in  the 
upbuilding  of  the  dairy  industry  in  Denmark.  They  can 
assist  the  grower  in  his  cultural  operations,  advise  him  in 
regard  to  the  fertilizers  to  be  used,  and  help  him  in  a  num- 
ber of  other  ways. 

To  reach  the  highest  efficiency,  an  association  must  be 
an  educational  power  among  its  members.  Unless  it 
cooperates  with  the  grower  in  making  the  rules  effective, 
it  cannot  establish  rules  of  harvesting,  grading,  and  packing 
and  then  eliminate  the  fruit  of  every  member  that  does 
not  square  with  the  rules.  Cooperation  means  mutual 
helpfulness.  It  means  the  adoption  of  a  high  standard 
of  business  procedure  and  then  an  organized  effort  to  teach 
the  individual  member  how  to  reach  this  standard  in  his 
personal  operations.  Arbitrary  dealing  with  the  members 
of  an  association  who  violate  the  rules  may  be  necessary 
to  maintain  the  high  standard  of  the  association,  but 
arbitrary  action  that  is  not  accompanied  by  an  effort  to 
help  the  erring  member,  breaks  the  cooperative  spirit,  and 
in  the  end  is  likely  to  disrupt  the  organization. 

Cooperation  in  the  Grading  and  Packing  of  Fruit 

It  is  not  possible  to  grade  and  pack  the  fruit  of  a  com- 
munity uniformly  when  the  individual  grower  performs 
these  operations.     Fruit  grading   and  packing  are  arts 


Handling,  Distributing ,  and  Sale  of  Fruit     219 

that  require  a  degree  of  skill  that  is  seldom  possessed  by 
the  individual  fruit-grower.  No  community  can  reach 
the  highest  efficiency  as  a  fruit-gro\ving  section  where  its 
reputation  depends  on  the  fruit  packed  and  graded  by  the 
individual  growers,  unless  the  growers  are  organized  and 
the  grading  and  packing  are  uniformly  done  in  accordance 
with  established  rules.  The  average  fruit-grower  will  not, 
and  cannot,  grade  and  pack  fruit  either  imiformly  or  ar- 
tistically. Many  do  not  pack  it  honestly.  The  frauds 
that  are  deliberately  perpetrated  by  many  of  the  farmers 
in  grading  and  preparing  their  products  for  sale  are  fully 
as  reprehensible  as  the  practices  that  have  already  been 
ascribed  to  the  dishonest  middlemen.  In  fact,  in  an  unor- 
ganized fruit  district  it  is  the  exception  rather  than  the 
rule  to  find  a  package  of  fruit  that  is  packed  and  graded 
uniformly  by  the  average  fruit-grower.  Wormy  apples 
are  mixed  with  the  sound  fruit,  the  sizes  are  mixed,  the 
color  is  not  uniform,  and  small  fruit  is  found  in  the  middle 
or  bottom  of  the  package.  A  community,  therefore,  in 
which  the  fruit  is  graded,  packed,  and  sold  by  the  individ- 
ual fruit-grower  seldom  acquires  a  high  reputation  as  a 
fruit-growing  section.  On  the  other  hand,  a  region  that 
contains  a  similar  class  of  growers  and  produces  similar 
grades  of  fruit  may  become  a  better  fruit-growing  region, 
it  may  increase  the  proportion  of  high-grade  fruit  produced 
and  increase  the  net  returns  to  the  individual  grower  by 
handling  the  grading,  packing,  and  marketing  problems 
under  a  comprehensive  business  system  through  a  coop- 
erative association. 


220  Cooperation  in  Agriculture 

Methods  of  Insuring  Uniformity  in  Grading  and  Packing 

There  are  several  methods  by  which  uniformity  in  the 
grading  and  packing  of  fruit  can  be  accomplished  in  a 
cooperative  association.  The  association  should  first 
define  the  grades  of  the  different  kinds  of  fruit.  It  should 
then  provide  rules  to  cover  the  grading  and  packing  and 
provide  the  machinery  by  which  these  rules  can  be  en- 
forced. Where  the  fruit  is  not  packed  in  central  packing- 
houses, it  is  sometimes  picked  and  packed  by  the  grower 
according  to  the  rules  of  the  association,  and  inspected  by 
an  employee  of  the  association  before  it  is  accepted  for 
shipment.  This  system  works  fairly  well  with  fruits  that 
have  to  be  handled  quickly  like  the  small  fruits  and  the 
deciduous  summer  fruits.  The  association  provides  an 
inspector  at  the  shipping  station,  warehouse,  or  other  point, 
and  he  makes  a  general  inspection  of  the  packages  when 
the  fruit  is  delivered  by  the  grower,  passing  the  packages 
that  conform  to  the  established  grades,  and  throwing  the 
other  packages  into  lower  grades  or  returning  them  to  the 
grower  for  regrading  and  packing.  This  is  the  least  effi- 
cient system  that  can  be  adopted,  because  it  does  not 
help  the  grower  in  the  original  grading  and  packing  of 
the  fruit. 

A  better  plan  is  to  have  the  grower  pick  the  fruit  when 
directed  to  do  so  by  the  association.  It  is  then  graded 
and  packed  in  the  orchard  or  packing-house  on  the  farm 
by  trained  men  in  the  employ  of  the  association,  working 
under  the  direction  of  an  association  foreman.  Under 
this  plan  the  fruit  of  the  members  of  an  association  can 
be  graded  and  packed  with  comparative  uniformity.    A 


Handling,  Distributing,  and  Sale  of  Fruit     221 

modification  of  this  plan,  and  one  that  is  much  less  effi- 
cient, is  to  have  the  fruit  graded  and  packed  by  the  grower 
under  the  rules  of  the  association,  but  with  all  of  the 
operations  under  the  direction  of  association  inspectors, 
who  visit  each  farm  once  or  twice  daily.  Under  either 
system  the  packages  need  to  be  inspected  before  they  are 
accepted  by  the  association,  the  inspection  taking  place 
at  the  shipping  station,  warehouse,  or  other  centralizing 
point.  Every  package  rejected  should  be  regraded  and 
repacked  at  the  expense  of  the  grower,  or  the  fruit  should 
be  placed  in  a  lower  grade.  This  system  is  in  operation 
in  several  of  the  most  successful  apple-growers'  associa- 
tions in  the  United  States. 

The  Hood  River  Apple-Growers^  Union 

A  pioneer  in  the  handling  of  apples  on  the  association 
plan  is  the  Hood  River  Apple-Growers'  Union  of  Hood 
River,  Oregon.  This  association  has  made  Hood  River 
famous  the  world  over  for  the  excellence  of  the  grading  and 
packing  of  the  apples  grown  in  the  Hood  River  Valley.  In 
order  to  show  the  details  of  its  methods,  the  leading  fea- 
tures of  the  constitution  and  by-laws,  the  grading  rules, 
and  the  regulations  for  1911  are  set  forth.  In  this  associa- 
tion the  fruit  is  picked  by  the  grower,  packed  on  his  place 
by  labor  under  the  control  of  the  union,  and  inspected  at 
the  union  warehouse  before  it  is  accepted  for  sale. 


222  Cooperation  in  Agriculture 


CONSTITUTION  AND  BY-LAWS  OF  THE  HOOD  RIVER 
APPLE-GROWERS'  UNION 

Article  I 

The  name,  place  of  business,  capital  stock,  and  purposes  of 
this  corporation  are  set  forth  in  the  Articles  of  Incorporation, 
which  are  referred  to  as  part  of  these  By-laws. 

Article  II 

The  membership  of  this  cori>oration  shall  be  confined  to  actual 
growers  of  fruit  of  Hood  River  Valley  and  vicinity. 


Article  IV 

The  directors  shall  have  the  power  to  levy  and  collect  assess- 
ments on  the  capital  stock  not  to  exceed  fifty  per  centum  of  the 
stock  subscribed  at  any  one  time,  and  not  oftener  than  every 
sixty  days ;  the  same  to  become  delinquent  in  thirty  days  from 
date  of  notice  of  such  assessment  in  the  local  newspaper.  The 
directors  shall  sell  shares  of  stock  to  actual  fruit-growers  only. 

Article  V 

The  directors  shall  employ  such  agents  orj>ther  employees  as 
are  necessary  to  do  the  business  of  the  corporation,  and  shall  fix 
their  remuneration ;  provided  that  the  Board  of  Directors  shall 
receive  no  salary  for  acting  as  directors.  They  shaU  have  daUy 
account  sales  rendered  to  the  members  of  the  Union  each  day, 
as  received  by  them  or  their  agent,  giving  a  statement  by  whom 
sold,  gross  sales,  commission,  freight  or  express,  and  amount  due 
members  of  the  Union ;  also  giving  condition  of  fruit,  if  there  be 
any  complaint. 


Handling,  Distributing,  and  Sale  of  Fruit     223 


Abticle  VI 

The  directors  may  refuse  to  receive  for  shipment,  under  the 
brand  of  the  Union,  any  package  of  fruit  not  considered  prime 
from  any  cause.  They  shall  refuse  to  receive  for  shipment  fruit 
from  any  person  not  holding  stock. 

Article  VII 

This  organization  through  its  Board  of  Directors  shall  have 
the  exclusive  and  unqualified  power  to  market  all  apples  grown 
by  any  of  its  members.  A  contract  between  each  member  and 
the  Board  will  be  required. 


Abticle  XIII 

No  Union  label  shall  be  placed  on  a  box  of  fruit  except  by  the 
Manager  of  the  warehouse  just  before  shipping. 

Article  XFV 

Each  packer  will  be  held  responsible  for  his  own  work  by  a 
system  of  fines.  No  fruit  will  be  received  unless  put  up  by  a 
packer  employed  by  the  Union. 

Article  XV 

The  Union  will  have  no  packing-house  foreman,  except  those 
employed  by  the  Union. 

The  following  Grading  Rules  will  generally  cover  the 
several  grades  (Hood  River) :  — 

Extra  Fancy  Grade.  —  This  grade  consists  of  normal-shaped 
apples  only.  The  apples  must  be  free  from  worm  holes,  stings, 
scale,  fungus,  scab,  rust,  water  core,  sun  scald,  dry  rot,  or  any 
other  disease,  and  free  from  all  insect  pests,  decay,  or  injuries. 


224  Cooperation  in  Agriculture 

They  must  be  free  from  bruises  and  limb  rubs,  and  the  skin 
around  the  stem  must  not  be  broken.  All  apples  must  be  clean, 
fully  matured,  not  deformed,  and  must  have  natural  color.  All 
red  apples  must  be  of  good  color.  Special  instructions  will  be 
mailed  covering  the  percentage  of  color  required  for  all  red  apples 
aside  from  the  Spitzenbergs. 

Fancy  Grade.  —  This  grade  consists  of  apples  a  httle  below 
Extra  Fancy,  and  includes  such  apples  as  are  not  perfect.  These 
must  be  good  apples,  not  culls.  No  apples  with  worm  holes 
or  broken  skin  will  be  accepted.  Limb  rubs  must  not  be  larger 
than  a  ten-cent  piece.  Only  two  stings  will  be  allowed,  and  no 
sting  is  permitted  where  the  skin  of  the  apple  is  broken.  No 
apples  will  be  accepted  if  affected  with  San  Jos6  scale,  dry  rot, 
or  which  show  an  open  or  black  bruise.  Apples  showing  fungus 
will  not  be  permitted  where  the  spot  is  larger  than  a  ten-cent 
piece.  All  red  varieties  must  show  some  red ;  that  is,  an  en- 
tirely green  apple  of  a  red  variety  cannot  go  in  this  grade. 

C  Grade.  —  The  C-grade  apples  shall  consist  of  merchantable 
apples  not  included  in  the  above  grades,  and  may  include  mis- 
shapen apples,  but  no  apples  containing  open  worm  holes,  scale, 
or  spots  showing  decay  will  be  permitted.  No  color  line  what- 
ever will  be  drawn  on  this  grade. 

Hood  River  Rules  for  Packers  and  Growers 

The  following  rules  and  regulations  cover  the  operations  of  the 
packers  and  growers  :  — 

1.  Each  packer,  before  beginning  work,  must  have  his  name 
registered  at  the  office  of  the  Union  and  receive  a  rubber  stamp. 
He  must  stamp  each  box  of  packed  apples  at  the  lower  left-hand 
corner  with  his  official  stamp. 

2.  Every  packer  must  put  up  a  first-class  pack. 

3.  When  a  box  is  packed  the  packer  shall  stamp  with  a  rubber 
stamp  upon  the  end  of  the  box,  in  the  center  near  the  top,  the 
exact  number  of  apples  the  box  contains. 

4.  Each  box  of  apples  must  be  packed  with  about  a  three- 
quarter  inch  swell  in  middle  of  top  and  bottom,  but  no  box 
should  be  packed  so  high  that  it  will  be  necessary  to  cleat  the 


Handling,  Distributing,  and  Sale  of  Fruit     225 

box  before  nailing  on  the  lid.  A  swell  on  the  box,  however,  does 
not  necessarily  mean  a  tight  pack ;  the  apples  must  be  tight  from 
side  to  side  and  from  end  to  end.  The  Union  wants  a  tight 
pack,  but  not  so  compact  as  to  bruise  the  apples. 

5.  Packers  will  be  furnished  meals  by  the  growers,  without 
cost,  or  allowed  seventy-five  cents  per  day  by  the  grower  for 
board,  but  must  make  necessary  arrangements  for  bedding. 
The  grower  will  furnish  bed  and  mattress. 

6.  Packers  are  required  to  pack  apples  only  properly  wiped 
and  sorted.  If  in  your  opinion  the  fruit  should  seem  to  be 
running  poor  grade  for  the  pack  you  are  putting  up,  notify  the 
Field  Inspector  or  the  office  at  once.  Remember  you  are  held 
mutually  responsible  with  the  grower  for  the  quality  of  your 
pack. 

7.  Each  packer  must  set  off  his  box  when  packed.  Do  not 
set  a  box  of  packed  apples  on  top  of  another  box  of  packed  apples 
which  has  no  cover.  This  wiU  brmse  those  in  the  imder  box. 
Be  very  careful  about  this. 

8.  The  packers  are  aU  under  the  supervision  of  the  Field  In- 
spector, who  may  dismiss  any  packer  for  cause. 

9.  All  packers  must  refrain  from  smoking  on  the  premises 
of  any  grower  against  his  wishes.  Failure  to  do  so  wiU  result  in 
dismissal. 

Special.  —  The  Union  wants  a  tight  pack  of  good  apples. 
Don't  jam  the  apples  in  and  bruise  them,  but  be  sure  to  fiU  the 
boxes  solid  full  in  all  directions,  up  and  down,  sideways  and  end- 
ways.    Don't  pack  slack ;    pack  full  and  compact. 

Sizes.  —  Four-tier  apples  include  nothing  smaller  than  one 
hundred  and  twenty-eight  size ;  one  hundred  and  forty-four  size 
is  special ;  four  and  one-half  tier  includes  one  hundred  and  fifty 
to  one  hundred  and  seventy-five  size  ;  five-tier  includes  one  hun- 
dred and  eighty-five  to  two  hundred  and  twenty-five  size. 

Packers  will  be  paid  five  cents  per  box  for  four-tier  and  larger, 
six  cents  per  box  for  four  and  one-half  tier  and  smaller,  and  also 
allowed  five  cents  per  box  for  sorting  off  the  packing  table  the 
apples  not  belonging  to  the  grade  which  they  are  packing.  Ten 
loose-sorted  boxes  will  be  counted  as  six  packed. 

Q 


226  Cooperation  in  Agriculture 

Packers  will  not  receive  payment  for  their  services  until  the 
apples  packed  by  them  shall  have  passed  inspection  at  the  re- 
ceiving warehouse. 

When  the  apples  upon  the  packing  table  are  not  properly 
graded,  the  packer  shall  immediately  notify  the  Field  Inspector, 
and  the  Field  Inspector  shall  examine  the  same  as  soon  as  pos- 
sible and  require  the  grower  to  resort  the  apples  for  the  packer, 
or  shall  pay  the  packer  for  sorting  them,  and  if  the  same  is  not 
done  by  the  grower,  the  Field  Inspector  shall  withdraw  the  packer 
and  place  him  at  some  other  orchard. 

Field  Inspectors  must  cover  their  respective  territories,  and 
advise  and  consult  with  the  apple-growers  as  often  as  possible, 
giving  them  instructions  for  the  correct  grading  and  sorting  of 
their  apples. 

Packers  must  not  permit  the  growers  to  influence  them  to  put 
inferior-grade  apples  into  the  pack,  but  should  always  bear  in 
mind  that  a  single  bad  apple  may  be  the  cause  of  having  their 
pack  held  up  by  the  Inspector  and  cause  both  themselves  and 
the  growers  more  or  less  loss  and  trouble. 

The  Central  Packing-House 

Another  plan,  and  the  most  efficient  of  all,  is  to  grade 
and  pack  the  fruit  at  a  central  packing-house  owned  and 
controlled  by  the  association.  The  growers  pick  the  fruit, 
haul  it  to  the  packing-house,  and  there  it  is  graded  and 
packed  by  the  association ;  or  the  fruit  may  be  picked  by 
labor  controlled  by  the  association,  then  hauled  to  the 
central  packing-house  by  the  grower,  and  there  graded 
and  packed.  Under  this  plan  the  picking,  grading,  and 
packing  of  the  fruit  of  a  community  is  standardized. 
The  nucleus  of  the  association  is  the  packing-house,  the 
manager  of  the  association  is  the  packing-house  manager, 
and  the  business  operations  of  the  association  are  trans- 
acted at  the  packing-house.    The  association  may  build 


Handling,  Distributing,  and  Sale  of  Fruit     227 

a  cold-storage  plant  as  an  adjunct  to  the  distributing  sys- 
tem, and  the  packing-house  may  be  equipped  with  box- 
making  and  labeling  machinery,  and  with  various  appli- 
ances which  the  individual  grower  cannot  afford,  but  which 
are  essential  in  the  efl&cient  and  economical  handling  of  a 
large  fruit  business. 

In  the  small-fruit  industry  the  central  packing-house 
is  hardly  practical.  It  is  often  operated  successfully  in 
the  deciduous  fruit  business  and  in  the  grape  industry. 
It  has  been  developed  most  extensively  in  the  citrus-fruit 
business  in  California  and  is  being  developed  in  the  as- 
sociation method  of  orange  handling  in  Florida.  There 
are  more  than  two  hundred  of  these  association  packing- 
houses in  the  citrus  industry  in  California.  The  packing- 
house is  erected  by  the  association  alongside  of  the  rail- 
road. It  is  equipped  with  all  the  necessary  appliances  for 
fruit-handling,  the  house  and  equipment  costing  from 
ten  to  twenty  thousand  dollars  or  more.  The  manager 
of  the  packing-house  is  usually  the  general  manager  of 
the  association,  and  he  receives  a  salary  varying  from 
fifteen  hundred  to  four  thousand  dollars  a  year. 

The  Pooling  of  Fruit 

Two  general  methods  may  be  adopted  in  handling  the 
fruit  of  the  individual  members  of  an  association.  In 
one,  the  product  of  the  individual  is  kept  separate,  and  the 
returns  to  the  grower  depend  on  the  sale  of  his  own  fruit. 
In  the  other,  fruit  of  similar  grade  belonging  to  the  differ- 
ent members  is  pooled  and  sold  under  the  brands  of  the 
association  as  a  common  commodity.  The  pool  is  an 
arrangement  by  which  the  fruit  of  similar  grade  of  all  the 


228  Cooperation  in  Agriculture 

growers  is  united  and  sold  together,  and  at  the  end  of  a 
pool,  the  grower  receives  his  pro  rata  of  the  proceeds  based 
on  the  number  of  pounds  or  packages  of  each  grade  that 
he  has  contributed. 

In  the  peach  business  and  in  smalWruit  shipping  the 
growers  may  adopt  a  daily  or  a  weekly  or  a  seasonal  pooling 
system ;  in  the  citrus  business  a  pool  may  extend  over  ten 
to  thirty  days  or  even  through  an  entire  season;  and 
in  the  apple  business  the  fruit  of  an  entire  season  may 
be  handled  through  a  single  pool,  though  a  separate  pool 
may  be  made  for  each  of  the  leading  varieties,  for  the 
different  grades,  and  sometimes  for  the  different  sizes  in 
each  grade.  In  the  orange  and  lemon  growers'  associa- 
tions the  different  grades  are  pooled  separately,  but  the 
sizes  in  each  grade  are  generally  pooled  together.  In 
theory  each  grower  has  the  right  to  contribute  to  each 
pool  his  pro  rata  of  the  fruit  of  the  association  as  a  whole. 
The  manager  of  the  association  usually  apportions  to 
each  grower  his  quota  of  the  fruit  to  be  shipped  in  a 
pool  in  accordance  with  his  acreage.  The  pooling  system 
simplifies  the  business  methods  of  an  association  and  is 
growing  in  favor  as  a  practical  working  plan. 

There  are  a  number  of  factors  that  are  likely  to  con- 
tribute to  the  success  or  failure  of  the  pooling  system.  To 
be  successful,  the  handling,  grading,  and  packing  of  the 
fruit  must  be  under  the  direction  or  control  of  the  associa- 
tion in  order  to  insure  uniformity.  It  is  not  often  success- 
ful when  these  matters  are  in  the  hands  of  the  grower.  It 
depends  further  on  having  a  large  proportion  of  the  fruit 
of  an  association  of  similar  character,  otherwise  a  member 
whose  fruit  grades  largely  into  a  low  class  becomes  dis- 


Handling,  Distributing,  and  Sale  of  Fruit     229 

satisfied  when  he  learns  that  his  neighbor's  fruit  grades 
higher.  It  is  characteristic  in  the  fruit  industry  that 
each  grower  thinks  he  produces  the  best  fruit  in  his  com- 
munity, and  where  it  happens  that  he  is  paid  for  a  larger 
proportion  of  the  lower  grades  than  his  neighbor,  he  may 
either  quit  the  association,  or  he  may  adopt  better  cultural 
methods  in  order  to  improve  the  quality  of  his  fruit.  As 
a  matter  of  policy  the  books  of  an  association  should  be 
open  to  every  member  so  that  he  may  see  whether  he  is 
producing  as  large  a  proportion  of  high-grade  fruit  as  the 
other  growers  in  the  community.  This  knowledge  leads 
to  a  friendly  rivalry  among  the  members  in  producing 
the  largest  proportion  of  the  higher  grades. 

There  is  considerable  variation  in  the  average  quality  of 
different  lots  of  fruit  in  the  same  grade,  even  under  the 
most  rigid  system  of  grading.  There  is  a  minimum  stand- 
ard in  each  grade  below  which  the  fruit  may  not  fall,  but 
there  is  a  marked  variation  in  the  fineness  of  texture  or  of 
finish,  in  the  color  and  general  style  of  different  lots  of  fruit 
that  may  fall  within  a  grade  as  established  by  the  associa- 
tion. These  differences  in  texture  and  general  style  are 
sometimes  due  to  the  soil  or  to  other  local  conditions,  the 
fruit  of  the  same  variety  on  other  soils  or  in  other  locations 
in  the  same  section  showing  characteristic  qualities.  On 
the  other  hand,  the  grade  of  fruit  growTi  under  similar 
conditions  of  soil  and  location  depends  largely  on  the  skill 
of  the  individual  fruit-grower.  The  association  can  there- 
fore utilize  the  differences  in  the  grades  of  the  fruit  of  the 
members  as  a  powerful  educational  factor  in  stimulating 
better  tillage,  better  pruning  and  thinning,  and  a  better 
cultural  system  in  a  community  as  a  whole. 


230  Cooperation  in  Agriculture 

There  is  another  side  also  to  the  pooling  system.  It 
may  discourage  the  skillful  grower  from  producing  fruit 
of  the  highest  average  grade.  If  a  member  is  an  unusually 
skillful  grower,  he  will  not  get  the  full  advantage  of  his 
extra-fine  fruit  in  a  pool,  because  the  practical  effect  of  the 
pool  is  to  lower  the  average  price  of  the  finest  and  to  raise 
the  price  of  the  fruit  that  can  just  enter  a  grade.  An 
association  ought,  therefore,  to  be  composed  of  growers 
who  are  located  on  similar  soils  and  in  other  similar  con- 
ditions and  who  possess  somewhat  similar  cultural  skill. 
In  some  of  the  northwestern  apple-growers'  associations 
the  fruit  of  a  large  area  is  pooled.  The  Spitzenbergs 
that  grade  fancy  under  the  rules  of  the  associations  may 
vary  considerably  in  different  localities  in  the  same  sec- 
tion. The  higher  orchards  often  yield  better  apples  than 
the  lowland  orchards.  Some  of  the  unusually  good 
growers  may  produce  a  crop  of  apples  in  which  the  fancy 
grade  is  above  the  average  of  the  fancy  grade  of  the  pool 
by  better  thinning,  better  spraying,  and  better  average 
cultural  care.  These  growers  are  likely  to  become  dis- 
satisfied with  the  association  and  may  withdraw  to  pro- 
tect their  business  interests.  Small  associations  com- 
posed of  growers  similarly  located  and  possessing  similar 
cultural  skill  avoid  these  difficulties.  A  community 
should,  therefore,  form  several  associations,  each  grading 
and  packing  its  fruit  under  the  brands  of  the  association. 
These  associations  may  then  federate  into  a  central  mar- 
keting agency  which  will  market  the  fruit  of  each  associa- 
tion as  a  unit  or  furnish  the  facilities  for  marketing,  thereby 
preserving  the  advantages  which  soil,  location,  and  cul- 
tural skill  give  to  a  group  of  fruit-growers  who  are  similarly 
located. 


Handling,  Distributing,  and  Sale  of  Fruit     231 

The  opponents  of  the  cooperative  plan  of  fruit-handling 
understand  these  difficulties  and  utilize  them  to  create 
dissension  among  the  members  of  an  organization.  They 
are  practical  difficulties  that  should  be  recognized  in  the 
formation  of  associations.  Unless  these  fundamental 
conditions  are  carefully  guarded,  the  pooling  system  may 
lower  the  average  grade  of  the  fruit  of  a  community,  because 
the  grower,  realizing  that  the  identity  of  his  fruit  is  lost  in 
a  pool,  lets  down  on  the  fundamental  cultural  operations 
that  produce  the  highest  grades  of  fruit,  and  trusts  to  the 
better  fruit  of  his  more  skillful  neighbors  to  raise  the 
average  net  return  for  the  grades  in  which  his  fruit  is 
pooled. 

Cooperative  Cold-Storage  Plants 

A  cooperative  association  may  erect  a  cold-storage 
plant  at  the  central  packing-house,  or  may  build  it  in- 
dependently as  an  adjunct  to  its  fruit-handling  and  mar- 
keting operations.  This  plant  may  be  used  to  pre-cool 
the  quick-ripening  fruits  before  shipment.  It  may  be 
used  as  a  centralizing  point  in  which  to  accumulate  large 
quantities  of  fruit  in  order  that  it  may  be  marketed  to 
better  advantage,  to  equalize  the  distribution  of  the  prod- 
uct over  a  longer  period  of  time,  or  to  hold  the  fruit 
until  the  surplus  is  exhausted,  with  a  view  to  securing 
higher  prices.  Such  plants  have  already  been  erected 
by  associations  of  orange-growers  in  California  and  by 
apple-growers  in  the  Northwest  and  in  the  Eastern  states. 
Following  the  investigations  by  the  United  States  Depart- 
ment of  Agriculture,  cold-storage  plants  have  been  built 
in    California   in   connection  with  association   packing- 


232  Cooperation  in  Agriculture 

houses  to  hold  from  twenty-four  to  fifty  carloads  of  oranges. 
The  fruit  is  cooled  to  thirty-five  degrees  Fahrenheit 
before  shipment,  and  is  then  forwarded  to  any  point  in 
the  United  States  with  the  initial  icing  of  the  cars  only. 
The  ice  used  in  filling  the  bunkers  of  the  car  is  manu- 
factured at  the  plant  or  is  supplied  to  the  shipper 
by  a  local  ice  company.  It  has  been  determined  by  the 
Interstate  Commerce  Conmaission  that  it  costs  the 
shipper  from  $30  to  $35  to  pre-cool  and  pre-ice  a  car  of 
oranges,  including  interest  on  the  investment  and  depre- 
ciation on  the  plant.  In  addition  to  this  the  railroad  charges 
the  shipper  $7.50  for  the  wear  and  tear  on  the  ice  bunkers 
when  a  car  is  iced  by  the  shipper  but  is  not  re-iced  in  transit, 
making  a  total  average  cost  to  the  shipper  of  $40  per 
car.  When  the  fruit  is  shipped  under  standard  refrigera- 
tion, the  railroads  furnishing  all  of  the  ice,  the  refrigera- 
tion charge  is  $60  to  the  Missouri  River,  $62.50  to 
Chicago  and  similar  points,  $72.50  to  Buffalo  and  Pitts- 
burg, $75  to  New  York,  and  $77.50  to  Boston.  The 
primary  object  of  pre-cooling  in  the  citrus-fruit  industry 
is  to  cheapen  the  cost  of  transportation.  This  the  growers' 
system  of  pre-cooling  and  pre-icing  does  when  compared 
with  the  regular  refrigeration  costs  to  the  extent  of  $20 
to  $37.50  per  car  on  fruit  shipped  to  the  Missouri  River 
points  and  to  Boston.  It  is  not  required  to  prevent  the 
fruit  from  decaying  while  in  transit,  because  an  orange  or 
lemon  that  is  properly  handled  is  immune  to  the  blue  mold 
decay.  The  cold-storage  plants  at  the  orange  packing- 
houses have  been  found  useful  in  extending  the  shipments 
at  the  last  of  the  season  when  prices  are  sometimes  un- 
usually high  and  in  handling  the  picking  and  packing 


Handling,  Distributing,  and  Sale  of  Fruit     233 

operations  more  uniformly  and  in  the  loading  of  cars  of 
desirable  grades  and  sizes  from  the  larger  accumulation  of 
packed  fruit  in  the  storage  rooms. 

There  is  some  question,  however,  whether  storage  plants 
should  be  erected  by  associations  primarily  to  cheapen 
the  cost  of  transportation.  The  legal  right  of  a  shipper 
to  pre-ice  a  car  is  questioned  by  the  Western  railroads,  and 
the  matter  is  now  before  the  courts  for  determination. 
The  Interstate  Commerce  Commission  considers  the  pre- 
icing  of  the  car  a  part  of  the  preparation  of  the  fruit  for 
shipment  and  has  recognized  the  right  of  the  shippers  to 
pre-ice  a  car  by  fixing  a  rate  which  the  railroads  may  charge 
when  the  shipper  pre-cools  and  pre-ices  a  car  and  forwards 
it  under  instructions  not  to  be  re-iced  in  transit.  The 
question  has  been  carried  by  the  railroads,  who  consider 
pre-icing  as  a  part  of  the  service  of  transportation,  to  the 
United  States  Commerce  Court,  and  until  it  is  decided  by 
the  courts  the  status  of  the  railroads  and  shippers  will 
probably  not  be  finally  determined. 

A  cold-storage  plant  is  most  useful  in  the  apple  industry. 
An  association  that  can  store  a  part  of  the  crop  is  pro- 
tected against  the  necessity  of  selling  the  fruit  at  the  prices 
that  prevail  during  the  harvesting  season.  The  prices 
at  that  time  may  be  fixed  arbitrarily  through  an  agree- 
ment by  the  buyers.  The  space  in  the  large  commercial 
storage  plants  may  be  in  the  hands  of  the  buyers,  and  the 
grower  is  obliged  to  accept  whatever  price  is  offered.  A 
cold-storage  plant  makes  it  possible  for  the  grower  to 
secure  the  highest  price  obtainable  for  the  fruit  by  protect- 
ing him  against  a  combination  of  conditions  through  which 
the  competition  of  buyers  is  eliminated  and  which  places 


234  Cooperation  in  Agriculture 

him  at  the  mercy  of  a  predatory  combmation.  The  same 
plant  may  be  used  for  cooling  peaches,  strawberries,  pears, 
or  other  quick-ripening  fruits  before  shipments,  and  for 
the  commercial  storage  of  other  products  that  may  be 
stored  between  the  apple  storage  seasons.  The  plant  may 
also  be  used  for  the  manufacture  of  ice  for  local  use  and 
for  the  initial  icing  of  the  cars. 

COOPERATION    D^   THE    DISTRIBUTION    AND    SALE    OF    FRUIT 

The  cooperative  fruit-growers'  organizations  of  the 
United  States  usually  sell  their  product  to  the  wholesale 
trade.  They  do  not  sell  to  the  retail  dealers  except  at 
auction  points  and  almost  never  attempt  to  sell  the  fruit 
to  the  consumer.  The  cooperative  association  makes  it 
possible  to  assemble  and  offer  for  sale  large  quantities  of 
fruit  that  is  uniformly  graded  and  packed.  The  associa- 
tion is  in  a  position  to  transact  business  in  a  large  way. 
It  can  perfect  an  economical  and  efficient  business  system 
and  can  protect  the  producer  against  the  abuses  of  the 
haphazard  methods  that  are  common  in  the  distribution 
and  sale  of  farm  crops.  It  is  in  a  position  to  give  stability 
to  the  distribution  of  a  crop  on  account  of  the  volume  it 
handles,  —  a  condition  that  is  seldom  realized  in  the  busi- 
ness of  the  individual  farmer. 

The  large  volume  of  business  which  an  association  can 
transact  in  contrast  with  the  small  quantity  that  an  in- 
dividual has  to  handle  is  a  business  asset.  It  replaces  a 
chaotic  business  system  by  a  method  that  is  capable  of 
being  systematized.  An  association  can  develop  brands 
that  will  be  bought  and  sold  confidently  by  the  trade. 
The  association  with  a  large  quantity  of  high-grade  fruit  is 


Handling,  Distributing,  and  Sale  of  Fruit     235 

not  dependent  on  any  one  method  of  marketing.  It  can 
adopt  that  which  is  best  fitted  to  its  local  conditions  and 
to  the  kind  of  fruit  that  it  handles.  The  best  buyers  are 
attracted  by  large  quantities  of  uniformly  graded  and 
packed  fruit.  The  best  results  follow  the  consignment  of 
regular  quantities  of  uniformly  graded  and  packed  fruit 
to  a  commission  merchant,  as  the  latter,  knowing  some- 
thing of  the  volume  of  business  to  be  transacted,  can  de- 
velop his  trade  as  no  merchant  can  who  handles  small 
quantities  for  individual  growers.  The  association  can 
develop  a  local  auction  system  or  sell  through  an  auction 
company  in  the  market,  or  if  necessary  can  establish  auc- 
tions of  its  own  in  the  large  cities.  It  can  sell  for  cash  to 
jobbers  at  point  of  shipment  or  on  delivery.  It  can  build 
a  cold-storage  plant  as  an  adjunct  to  its  distributing  sys- 
tem. It  can  advertise  and  stimulate  consumption  in 
other  ways,  develop  a  sales  department,  legal,  traffic,  audi- 
tor's, and  other  necessary  departments,  and  it  can  adopt 
other  methods  and  precautions  that  are  necessary  to 
insure  the  management  and  development  of  its  business 
along  the  most  effective  business  lines. 

The  Associated  Methods  of  Selling  Fruit 

Whether  an  association  should  sell  its  fruit  for  cash 
at  the  point  of  production,  or  on  delivery  at  destination, 
consign  it  to  distant  commission  merchants  or  to  auction 
companies,  or  consign  it  to  its  own  agents  to  be  sold  on 
arrival,  depends  upon  the  character  of  the  fruit,  the  volume 
of  the  business,  the  season  of  the  year,  the  section  of  the 
country  into  which  the  fruit  is  to  be  shipped,  and  the  con- 
dition of  the  fruit  trade. 


236  Cooperation  in  Agriculture 

A  Small  Association.  —  A  small  association,  like  the 
individual  fruit-grower,  is  handicapped  in  disposing  of  its 
product.  As  a  general  principle,  it  will  do  best  by  sell- 
ing to  local  buyers,  to  jobbers,  or  to  distant  jobbers  for 
cash  at  the  shipping  point,  leaving  the  risks  of  transporta- 
tion and  of  marketing  to  the  established  marketing  agen- 
cies. Under  this  method  a  carload  of  fruit  usually  brings 
a  lower  net  price  than  a  carload  of  similar  sound  fruit 
would  bring  at  destination  because  of  the  risk  of  trans- 
portation and  final  sale.  The  small  association  is  not  in 
a  position  to  develop  a  comprehensive  marketing  system. 
When  a  carload  is  shipped  from  a  packing-house  to  be  sold 
at  some  future  time,  the  small  shipper  is  at  the  mercy  of 
the  trade.  His  product  is  subject  to  discount  from  de- 
cay, from  over-ripeness,  from  alleged  bad  packing,  and 
from  every  other  factor  that  gives  the  unfair  buyer  an 
excuse  to  reduce  the  price,  especially  on  a  declining  mar- 
ket. He  is  equally  at  the  mercy  of  the  dishonest  com- 
mission merchant  if  the  fruit  is  shipped  on  consignment. 
Selling  for  cash  at  the  point  of  production  gives  the 
grower  his  money  quickly,  and,  if  there  is  actual  competi- 
tion among  buyers,  this  method  on  the  whole  is  likely 
to  be  more  satisfactory  than  any  other  that  the  small 
association  can  adopt. 

A  Large  Volume  of  Business.  —  The  association  that 
has  a  large  quantity  of  fruit  need  not  be  restricted  to  a 
selling  system  at  the  point  of  production.  It  can  adopt 
this  method  if  it  is  found  to  be  most  satisfactory,  but  it 
is  in  a  position  to  develop  a  marketing  system  whereby 
its  product  can  be  sold  in  distant  markets  as  well  and  the 
demand  for  its  fruit  developed  at  the  same  time.    A 


Handling,  Distributing,  and  Sale  of  Fruit     237 

large  association  or  federation  of  associations  can  select 
brokerage  agents  to  represent  it  in  the  principal  markets, 
it  can  place  salaried  agents  in  these  markets  to  sell  the 
fruit  to  the  wholesale  trade,  and  it  can  put  the  fruit  in 
storage  from  which  it  can  be  sold  on  order,  consignment, 
or  at  auction.  Through  orders  obtained  by  the  agents  in 
the  distant  markets,  the  association  or  the  members  of  a 
federation  can  sell  carloads  of  established  brands  for  cash 
F.O.B.  at  the  point  of  production  or  on  delivery,  or  it 
can  adopt  any  other  method  which  produces  a  more  satis- 
factory result. 

Perishable  Fruit.  —  As  a  general  rule  an  association 
which  handles  perishable  fruit,  like  the  small  fruits, 
peaches,  plmns,  and  other  summer  fruits,  will  do  best  to 
sell  at  the  point  of  production  under  any  of  the  methods 
previously  described,  unless  the  association  is  large  enough 
to  develop  a  comprehensive  marketing  system  and  can 
consign  the  cars  to  its  own  agents  to  be  sold  at  private 
sale  or  at  auction  on  arrival  at  destination.  The  small 
association  which  handles  perishable  fruit  must  sell  at  the 
shipping  point,  consign  to  a  commission  merchant,  or 
sell  through  a  brokerage  agent  in  the  market.  The  per- 
ishable fruits  must  be  sold  quickly,  and,  as  a  general  rule, 
the  average  producer  will  fare  best  when  he  depends  upon 
the  buyers  who  assemble  at  the  shipping  points  to  sell  and 
bring  his  product  into  quick  consumption.  On  the  other 
hand,  a  locality  that  produces  a  small  quantity  of  fruit 
will  not  attract  buyers,  and  the  association  then  has  to 
consign  to  commission  merchants,  or  develop  other  meth- 
ods of  sale. 

The  system  of  selling  at  the  point  of  production  becomes 


238  Cooperation  in  Agriculture 

inadequate  when  a  section  produces  a  large  quantity  of 
perishable  fruit.  In  California,  for  example,  the  F.O.B. 
method  of  selling  either  to  local  buyers,  or  on  order  from 
distant  firms,  was  satisfactory  when  the  deciduous  fruit 
business  was  small.  But  as  the  fruit  business  increased, 
the  buyers  were  unable  to  develop  markets  satisfactory 
to  the  shippers,  and  the  associations  of  shippers  were 
obliged  to  do  their  own  distributing  and  to  depend  on 
the  auction  markets  in  the  larger  cities  as  a  means  of  get- 
ting a  larger  quantity  of  fruit  before  the  retail  trade. 
The  jobbing  and  commission  firms  who  handled  the  Cali- 
fornia fruit  were  unable  to  develop  a  trade  that  would 
give  the  California  producer  a  profit  on  his  business. 
Now  fifty  per  cent  of  the  deciduous  fruit  of  California 
is  sold  at  public  auction  in  the  large  cities. 

Fruit  with  Long-keeping  Qualities.  —  The  distribution 
and  sale  of  fruit  that  can  be  kept  a  long  time  without 
deterioration  from  decay  or  over-ripeness  can  be  handled 
by  a  cooperative  association  more  easily  than  the  highly 
perishable  kinds.  Apples  and  citrus  fruits  can  be  shipped 
long  distances  and  may  be  stored  several  weeks  or  months 
without  excessive  loss.  They  are  more  like  the  staple 
farm  crops  and  can  be  handled  under  a  system  that  would 
not  be  practical  with  fruits  of  a  shorter  season,  or  of  a 
highly  perishable  nature.  With  these  products  a  compre- 
hensive marketing  system  can  be  developed  by  the  growers 
themselves  which  will  insure  uniformity  in  the  distribu- 
tion of  the  product  throughout  the  country  and  over  the 
season.  Whether  they  should  sell  the  fruit  at  the  point 
of  production  or  in  the  centers  of  consumption  depends 
on  local  conditions,  the  competition  or  absence  of  competi- 


Handling,  Distributing,  and  Sale  of  Fruit     239 

tion  among  buyers,  the  section  in  which  the  fruit  is  to  be 
shipped  and  the  volume  of  business  to  be  handled.  With 
these  fruits  the  growers  can  afford  to  take  the  risks  of 
distribution  and  of  final  sale.  They  are  less  dependent 
on  the  local  buyers,  and  they  can  sell  at  the  point  of 
production,  to  distant  buyers  on  an  F.O.B.  cash  basis, 
or  subject  to  inspection  on  arrival,  through  auction  com- 
panies or  through  their  own  agents. 

THE   CITRUS   FRUITS   OF  CALIFORNIA 

The  citrus  fruits  of  California  can  be  handled  differently 
from  any  other  American  fruit.  They  are  staple  prod- 
ucts, and  the  distribution  and  marketing  can  be  reduced 
to  a  systematic  basis.  The  growers  have  been  obliged  to 
develop  the  most  comprehensive,  scientific  system  of 
crop  distribution  that  is  applied  to  a  farm  product  any- 
where in  the  world  in  order  to  safeguard  their  property 
interests  by  insuring  a  proper  distribution  and  marketing 
of  their  crop.  They  cannot  risk  their  property  by  de- 
pending on  local  and  distant  jobbers  and  fruit  buyers 
to  distribute  their  fruit,  pay  them  a  fair  price  for  their 
crops,  and  at  the  same  time  create  a  demand  that  will 
take  care  of  the  constantly  increasing  product.  They 
have  been  obUged  to  ehminate  speculation  from  the  dis- 
tribution of  their  crop  and  to  distribute  it  evenly  on  a 
merchandizing  basis.  As  an  outcome  of  an  experience  of 
twenty  years,  sixty-five  per  cent  of  the  growers,  through 
one  organization,  the  California  Fruit-growers'  Exchange, 
have  placed  their  own  agents  in  the  leading  cities  of 
the  United  States  and  Canada,  and  through  these  agents 
the  growers   distribute  the  vast  crop  to  the  wholesale 


240  Cooperation  in  Agriculture 

trade,  they  increase  consumption  through  advertising 
and  in  other  ways,  and  through  their  grasp  of  the 
daily  market  conditions  throughout  the  country  they 
distribute  and  sell  the  crop  under  advantages  that  no 
other  system  can  approach.  Occasionally  an  effort  is 
made  by  local  brokers,  or  auction  companies,  or  by  other 
local  interests  who  are  interested  in  making  money  by 
handling  the  growers'  product  to  have  the  cooperative 
organizations  change  the  methods  which  have  been  de- 
veloped as  a  result  of  years  of  experience  and  return  to 
the  former  system  of  selling  the  fruit  to  speculative 
buyers  in  California,  either  direct  or  through  local  auction 
sales,  leaving  the  distribution  of  the  crop  and  the  exten- 
sion of  trade  entirely  in  the  hands  of  the  speculators. 
These  efforts  are  made  by  those  who  aim  to  exploit  the 
citrus-fruit  growers  rather  than  to  develop  the  industry. 
They  aim  to  disrupt  the  present  marketing  system  so 
that  they  can  absorb  the  growers'  profit  through  divi- 
dends on  the  stock  of  the  auction  company  rather  than 
to  make  a  profit  for  the  grower.  The  principle  of 
depending  on  a  large  number  of  speculative  buyers  who 
purchase  the  fruit  in  California,  to  give  the  producer  a 
fair  price  for  the  fruit  and  at  the  same  time  develop  a 
comprehensive  system  of  distribution  that  will  take  care 
of  the  increasing  crop,  is  unsound  from  the  economic 
point  of  view.  It  was  tried  in  the  early  days  of  the  in- 
dustry and  failed.  The  present  system  insures  uniformity 
in  the  distribution  of  their  crops  through  the  United 
States  and  Canada  and  uniformity  in  the  shipments 
throughout  the  year.  It  gives  stability  to  the  business 
of  the  fruit  jobber  in  every  market  of  the  United  States, 


Handling,  Distributing,  and  Sale  of  Fruit     241 

making  it  a  merchandizing  rather  than  an  uncertain 
speculative  business.  The  present  system  is  the  leading 
factor  that  insures  the  stability  of  the  citrus  industry  and 
protects  the  two  hundred  million  dollars  that  are  invested 
in  the  groves  and  packing-houses. 

Selling  the  California  Citrus-fruit  Crop 

The  California  orange  and  lemon  crop  now  equals  nearly 
fifty  thousand  carloads,  or  twenty  million  boxes.  There 
are  more  than  twelve  thousand  growers  engaged  in  the 
culture  of  the  fruit.  Probably  three-fourths  of  them  are 
organized  into  cooperative  associations,  sixty-five  per  cent 
of  which  are  federated  into  the  California  Fruit-growers' 
Exchange.  These  associations  build  a  packing-house  in 
which  the  fruit  of  the  members  is  assembled,  graded, 
packed,  and  made  ready  for  shipment.  The  methods 
under  which  these  organizations  operate  will  be  under- 
stood by  a  brief  description  of  the  principles  underlying 
the  exchange  system. 

The  California  Fruit-growers'  Exchange 

The  California  Fruit-growers'  Exchange  is  an  organiza- 
tion which  acts  as  a  clearing  house  in  providing  the  facili- 
ties through  which  sixty-five  hundred  growers  distribute 
and  market  their  fruit.  The  exchange  system  is  built  on 
three  foundation  stones :  the  local  associations  of  growers, 
through  which  the  fruit  is  prepared  for  market ;  the  dis- 
trict exchanges  into  which  the  associations  of  a  community 
are  federated  and  which  act  as  clearing  houses  for  the  local 
associations;  and  the  central  exchange,  which  provides 
agents  through  which  the  district  exchanges  in  coopera- 


242  Cooperation  in  Agriculture 

tion  with  the  associations  distribute  and  market  the  fruit 
for  the  growers.  The  local  associations,  the  district  ex- 
changes, and  the  California  Fruit-growers'  Exchange  are 
organized  and  managed  by  the  growers  on  a  non-profit 
cooperative  basis,  each  of  them  operating  at  cost,  and 
each  distributing  the  entire  net  proceeds  to  the  growers 
after  operating  expenses  are  deducted. 

The  Local  Associations.  —  There  are  a  hundred  and 
fifteen  local  associations  in  the  California  Fruit-growers' 
Exchange.  These  associations  are  formed  by  the  growers 
of  a  community,  the  membership  including  from  forty  to 
two  hundred  members  and  on  the  average  about  five 
hundred  acres  of  groves.  The  growers  usually  organize 
as  a  corporation  without  profit  under  the  laws  of  Cali- 
fornia and  issue  stock  in  proportion  to  the  bearing  acreage, 
to  the  number  of  boxes  shipped,  or  in  equal  amoimt  to 
each  grower.  The  association  usually  owns  a  packing- 
house alongside  a  railroad  where  the  fruit  of  the  members 
is  assembled,  graded,  pooled,  packed,  and  prepared  for  ship- 
ment, these  operations  being  done  at  cost  prorated  on  the 
number  of  boxes  shipped  by  each  grower.  The  associa- 
tions are  managed  by  a  board  of  directors  and  a  manager, 
and  are  conducted  exclusively  for  the  benefit  of  the  grow- 
ers. They  accumulate  no  profit  and  declare  no  dividends. 
The  fruit  is  generally  pooled  each  month,  or  sometimes 
a  pool  includes  the  entire  season,  each  grower  receiving 
his  proportion  of  the  proceeds  received  for  each  grade 
handled  during  the  pool.  Occasionally  the  association 
handles  the  fruit  for  each  member  individually.  Many  of 
the  associations  pick  the  fruit,  and  some  of  them  prune  and 
fumigate  the  trees  for  the  members.     The  associations 


Handling,  Distributing,  and  Sale  of  Fruit     243 

have  brands  for  each  grade  of  fruit,  and  when  a  carload  is 
ready  for  shipment  it  is  marketed  in  cooperation  with  the 
district  exchange  of  which  the  association  is  a  member 
through  the  agents  and  facilities  provided  by  the  Cali- 
fornia Fruit-growers'  Exchange. 

The  District  Exchange.  —  The  local  associations  have 
formed  seventeen  district  exchanges.  These  exchanges 
are  corporations  without  profit,  with  nominal  capital 
stock,  each  association  in  the  exchange  usually  owning 
one  share  and  having  one  member  as  its  representative 
on  the  board  of  directors.  There  may  be  one  or  more 
district  exchanges  in  a  community  depending  on  the  num- 
ber of  local  associations  and  the  local  conditions.  The 
function  of  the  district  exchange  is  to  act  as  a  clearing 
house  in  marketing  the  fruit  in  cooperation  with  the 
associations  through  the  faciUties  provided  by  the  Cali- 
fornia Fruit-growers'  Exchange,  and  to  act  as  the  medium 
through  which  most  of  the  business  relations  between 
the  exchange  and  the  local  associations  are  handled. 
It  is  the  duty  of  the  district  exchange  to  order  cars  and 
to  see  that  they  are  placed  by  the  railroads  at  the  various 
packing-houses,  to  keep  a  record  of  the  cars  shipped  by 
each  association  with  their  destinations,  to  inform  them- 
selves through  the  California  Fruit-growers'  Exchange  of 
all  phases  of  the  citrus-marketing  business,  to  place  the 
information  before  the  associations,  to  receive  the  returns 
for  the  fruit  through  the  central  exchange,  and  to  return 
the  proceeds  to  the  associations. 

The  Central  Exchange.  —  The  California  Fruit-growers' 
Exchange  is  a  non-profit  corporation  under  the  laws  of 
California  formed  by  the  seventeen  district  exchanges  with 


244  Cooperation  in  Agriculture 

a  capital  stock  of  ten  thousand  dollars.  The  Exchange  is 
managed  by  a  general  manager ;  it  has  a  board  of  seventeen 
directors,  one  representing  each  district  exchange.  The 
fmiction  of  the  California  Fruit-growers'  Exchange  is  to 
furnish  marketing  facilities  for  the  district  exchanges  and 
associations  at  a  pro  rata  share  of  the  cost.  The  exchange 
places  bonded  agents  in  the  principal  markets  in  the  United 
States  and  Canada,  defines  the  duties  of  the  agents  and  ex- 
ercises supervision  over  them.  It  gathers  daily  information 
through  them  of  conditions  in  each  market  and  furnishes 
it  daily  in  bulletin  form  to  the  associations.  The  exchange 
makes  prompt  accounting  of  returns  which  are  sent  to 
the  shippers  through  the  office  of  the  district  exchange. 
It  takes  care  of  all  litigation  that  arises  in  connection  with 
the  marketing  of  the  fruit,  handles  all  claims,  conducts  an 
extensive  advertising  campaign  to  increase  the  demand 
for  citrus  fruit,  develops  new  markets,  and  performs  such 
other  functions  as  are  set  forth  in  the  contracts  between 
the  central  exchange,  the  district  exchanges,  and  the 
associations.  At  the  end  of  the  year  the  central  ex- 
change levies  an  assessment  against  each  district  ex- 
change for  a  pro  rata  share  of  the  expense  on  a  basis 
of  the  number  of  boxes  shipped.  The  exchange  declares 
no  dividends,  and  it  does  not  buy  or  sell  fruit  or  any 
other  commodity,  and  exercises  no  control  either  directly 
or  indirectly  over  their  sale  or  purchase.  Its  function  is 
to  provide  the  facilities  for  the  distribution  and  market- 
ing of  the  fruit  for  those  shippers  that  wish  to  avail 
themselves  of  them.  Under  the  exchange  system  every 
shipper  reserves  the  right  to  regulate  and  control  its  own 
shipments ;  to  use  its  own  judgment  as  to  when  and 


Handling,  Distributing,  and  Sale  of  Fruit     245 

in  what  amount  it  shall  ship;  to  what  markets  it  shall 
ship  and  the  price  it  is  willing  to  receive ;  reserving  the 
right  of  free  competition  with  all  other  shippers,  including 
other  members  of  the  same  organization  uncontrolled  by 
any  one.  The  agent  in  the  market  acts  directly  under  the 
order  of  the  shipper,  who  determines  the  price  at  which 
each  car  shall  be  sold  outside  of  the  auction  markets  and 
all  other  matters  connected  with  its  disposition,  the  Cali- 
fornia Fruit-growers'  Exchange  acting  as  the  medium 
through  which  orders  pass  from  the  agent  to  the  shipper, 
but  never  selling  a  car  or  determining  the  price  at  which 
it  shall  be  sold. 

The  exchange  is  a  broadly  democratic  organization  in 
which  the  growers  exercise  control  over  all  matters.  The 
membership  in  the  exchange  is  voluntary ;  a  grower  may 
withdraw  from  an  association  at  the  end  of  the  year,  an 
association  may  withdraw  from  a  district  exchange,  and  a 
district  exchange  may  withdraw  from  the  central  exchange, 
these  relations  being  set  forth  in  the  various  contracts 
that  hold  the  members  together.  There  is  no  attempt 
on  the  part  of  the  central  exchange  to  regulate  shipments 
or  to  influence  prices.  In  this  connection  its  function 
ends  in  keeping  the  associations  informed  daily  regarding 
the  shipments  from  California,  the  general  movement  and 
market  conditions  in  the  different  marketing  points,  and  in 
furnishing  such  other  information  as  will  allow  the  growers 
through  their  associations  and  district  exchanges  to  de- 
cide these  questions  for  themselves.  One-third  of  the 
entire  shipment  is  sold  in  the  auction  markets,  and  the 
remainder  at  other  points  through  unrestricted  competi- 
tion.    There  is  no  uniformity  in  price  in  the  different 


246  Cooperation  in  Agriculture 

brands,  because  the  fruit  in  each  section,  on  account  of 
soil  and  other  local  differences,  has  an  individuality  of  its 
own,  and  every  brand  sells  on  its  own  merits. 

There  are  in  addition  to  the  California  Fruit-growers' 
Exchange  about  forty  independent  cooperative  associa- 
tions and  individual  grower-shippers,  which,  with  the 
exchange,  handle  eighty-five  per  cent  of  the  citrus-fruit 
crop.  The  independent  cooperative  associations  conduct 
their  operations  along  the  same  general  lines  as  outlined 
above;  except  that  they  market  through  brokers  in  the 
market,  all  of  the  business  transactions  being  handled 
direct  or  by  an  agent  who  represents  them  in  all  of  their 
business  transactions.  In  addition  to  these  associations 
and  independent  grower-shippers,  a  small  proportion  of 
the  fruit  is  handled  by  speculative  buyers  or  is  shipped 
through  agents  to  Eastern  firms  on  consignment. 

Fixing  a  Price 

There  is  a  tendency  in  farmers'  cooperative  associations 
to  fix  the  price  at  which  the  entire  crop  shall  be  sold,  or 
the  price  for  a  period  in  advance,  or  for  the  different  grades 
of  produce.  They  are  induced  sometimes  to  regulate  the 
output,  divide  the  territory,  and  to  follow  other  practices 
that  restrict  competition  and  regulate  prices.  These  prac- 
tices or  any  others  that  tend  to  regulate  the  price  or  to 
restrain  or  regulate  trade  conditions  are  likely  to  bring 
an  association  in  conflict  with  the  state  and  federal  stat- 
utes that  have  been  enacted  to  prevent  combinations  of 
any  kind  that  act  unreasonably  in  the  regulation  of  prices 
or  in  restraint  of  trade.  Such  practices  when  followed 
by  manufacturers  have  been  declared  illegal  by  the  courts. 


Handling,  Distributing,  and  Sale  of  Fruit     247 

Present  Cooperative  Methods  of  Citrus  Distribviion 

As  long  as  the  country  is  prosperous  and  the  present 
method  of  distribution  and  sale  takes  care  of  the  increase 
in  production,  the  producers  will  be  satisfied  to  continue 
the  methods  now  in  operation.  As  the  fruit  business 
increases,  and  it  is  likely  to  double  in  volume  in  the  next 
fifteen  years,  it  may  be  necessary  for  the  growers'  asso- 
ciations to  still  further  develop  the  methods  of  distribu- 
tion so  that  the  fruit  may  be  placed  in  the  consumer's 
hands  at  a  cost  nearer  that  which  the  producer  himself 
receives.  The  system  which  has  been  adopted  by  the 
citrus-fruit  growers  has  brought  about  economies  in  the 
purchase  of  supplies,  in  preparing  the  product  for  ship- 
ment, and  in  the  cost  of  selling  the  fruit ;  it  has  secured 
lower  freight  rates,  reduced  the  losses  from  bad  debts; 
it  has  standardized  the  physical  handling  of  the  fruit,  the 
grading  and  the  packing,  and  has  thereby  given  the  con- 
sumer a  better  product ;  it  creates  a  demand  for  oranges 
and  lemons  by  advertising,  and  it  distributes  the  product 
uniformly  to  the  wholesale  trade  throughout  the  year  and 
throughout  the  country.  This  uniformity  in  distribution 
has  increased  the  demand  for  citrus  fruits  and  has  resulted 
in  a  lower  retail  price  to  the  consumer  and  gives  a  larger 
proportion  of  the  retail  price  to  the  producer.  The  co- 
operative method  sometimes  doubles  the  net  returns  to 
the  grower  without  affecting  the  price  which  the  consumer 
has  to  pay.  There  is  a  wide  difference  between  the  price 
which  the  producer  receives  from  the  wholesale  trade  and 
the  price  which  the  consumer  pays  for  citrus  fruits,  a 
recent  investigation  by  Secretary  of  Agriculture,   Wil- 


248  Cooperation  in  Agriculture 

son,^  showing  that  when  the  consumer  buys  oranges  by  the 
dozen,  the  producer  receives  only  twenty  per  cent  of  the 
retail  price,  whereas  he  receives  59.3  per  cent  when 
the  purchase  is  by  the  box.  It  has  been  shown  by 
the  Committee  on  Markets,  Prices,  and  Costs  of  the  New 
York  State  Food-investigating  Commission  in  1912,  that 
the  cash  margin  between  the  wholesaler's  cost  and  the 
retailer's  selling  price  of  a  dozen  lemons  is  122.2  per  cent 
over  the  wholesale  cost ;  bananas,  135.2  per  cent ;  Baldwin 
apples,  116.2  per  cent;  and  Florida  oranges,  40  per  cent. 
Before  the  California  citrus  growers  systematized  these 
operations,  the  cost  of  handling  and  packing  the  crop  was 
nearly  double  the  present  cost.  The  crop  then  was  a  specu- 
lative product  and  was  controlled  by  speculative  dealers 
rather  than  by  the  producers.  There  was  a  wider  varia- 
tion in  the  wholesale  price  of  both  oranges  and  lemons. 
Now  the  retail  price  of  oranges  is  usually  lower  than  the 
retail  price  of  apples,  and  the  orange  has  been  transferred 
from  a  luxury  to  a  staple  article  of  diet. 

THE  COOPERATIVE  DISTRIBUTION  AND  SALE  OF  OTHER 
FARM  PRODUCTS 

The  cooperative  method  of  conducting  the  business  of 
the  farmer  may  be  applied  to  other  branches  of  agricul- 
ture not  already  discussed  in  the  foregoing  pages.  The 
vegetable  growers  of  the  East  and  of  the  Southwestern 
states  have  cooperative  organizations ;  the  walnut  grow- 
ers, the  lima-bean  growers,  the  celery  and  cauliflower 
growers,  the  raisin  and  dried-fruit  interests  of  California, 
are  organized  to  a  greater  or  less  extent,  the  potato  grow- 

'  Report  of  Secretary  of  Agriculture,  1910,  p.  22. 


Handling,  Distributing,  and  Sale  of  Fruit     249 

era  of  Maine  and  of  the  Delaware,  Maryland,  and  Virginia 
peninsula,  and  the  growers  of  different  kinds  of  fruit 
in  the  Northwest,  the  cantaloupe  growers  of  Colorado,  the 
rice  growers  of  Louisiana,  and  growers  of  other  products 
have  associated  under  various  forms  to  act  for  them  in 
the  distribution  and  sale  of  their  products  through  co- 
operation rather  than  through  individual  effort.  The 
cooperative  method  is  already  in  operation  among  the 
live-stock  shippers  of  Minnesota,  and  it  is  applicable  uni- 
versally to  the  distribution  and  sale  of  live-stock  and  of 
live-stock  products  in  every  part  of  the  United  States. 
The  principles  that  have  been  discussed  can  be  applied 
to  the  cooperative  distribution  of  all  kinds  of  farm  crops 
and  of  manufactured  products,  though,  of  course,  the  de- 
tails of  organization  and  of  operation  will  need  to  be  varied 
to  meet  the  peculiar  conditions  in  each  industry. 


CHAPTER  IX 

COOPERATION  IN  THE  PURCHASE  OF  SUPPLIES 

One  of  the  most  important  fmictions  of  a  cooperative 
association  is  to  purchase  the  supplies  used  on  the  farm 
and  in  the  handling  and  marketing  of  the  crops.  The 
association  may  act  as  a  merchant  by  buying  the  supplies 
and  selling  them  to  the  members,  or  as  a  clearing  house 
through  which  to  secure  favorable  quotations  from  manu- 
facturers and  wholesale  dealers,  acting  for  the  members 
in  placing  the  orders  with  the  dealers  who  supply  the  dif- 
ferent kinds  of  materials  and  in  collecting  the  money  from 
the  members  for  the  same.  It  may  also  become  a  manu- 
facturer of  such  supplies  as  box  material  and  other  kinds 
of  finished  lumber,  or  it  may  operate  a  plant  for  the  mix- 
ing of  fertilizers.  Under  either  method  a  well-managed 
supply  company  should  be  able  to  furnish  fertilizers,  coal, 
lumber,  nails,  twine,  spraying  materials,  tools,  and  ma- 
chinery at  a  lower  cost  than  the  farmer  pays  when  he  buys 
them  from  the  local  merchant  at  the  prevailing  retail 
prices. 

THE   ORGANIZATION   OF  A  SUPPLY   COMPANY 

The  supply  company  may  be  formed  as  a  department 
of  a  cooperative  association  already  organized  to  distrib- 
ute and  sell  the  farm  crops,  as  is  often  done  in  connection 
with  cooperative  creameries,  grain  elevators,  and  fruit- 

250 


Cooperation  in  the  Purchase  of  Supplies      251 

growers'  associations,  or,  if  the  volume  of  business  is  large 
enough,  it  may  be  organized  as  a  separate  cooperative 
corporation.  The  supply  companies  are  usually  formed 
as  stock  corporations,  though  sometimes  they  are  organized 
on  a  non-profit  basis.  They  may  be  formed  under  the 
ordinary  stock  corporation  laws  and  still  include  the  es- 
sential features  of  a  cooperative  association  by  limiting 
the  amount  of  stock  to  be  held  by  a  member,  by  requiring 
that  shares  of  stock  shall  be  non-transferable  until  after 
they  are  first  offered  for  sale  to  the  association,  by  adopt- 
ing the  "one  man,  one  vote"  method  of  administration,  by 
restricting  the  dividends  to  be  paid  on  capital  stock  to  a 
nominal  rate  of  interest,  and  by  distributing  the  remaining 
net  profits  according  to  the  amoimt  of  patronage  of  each 
member,  after  setting  aside  an  amount  for  depreciation 
on  the  property,  a  fixed  interest  on  the  capital  stock,  and 
a  reasonable  reserve  fund. 

A  supply  company  occupies  a  somewhat  different  posi- 
tion than  a  distributing  association.  The  former  has  to 
pro\'ide  capital  before  it  can  purchase  the  supplies  for 
its  members.  In  the  latter  the  capital  required  is  for 
operating  expenses  and  for  buildings  and  equipment,  and 
these  expenses  are  provided  as  the  business  progresses 
by  retaining  certain  percentages  from  the  sale  of  the  prod- 
ucts. It  is  therefore  desirable  to  organize  a  supply  com- 
pany as  a  stock  corporation  with  a  capital  sufl5ciently 
large  to  be  used  in  conducting  the  business,  or  to  be  used 
as  security  in  providing  such  capital  as  is  needed,  defining 
the  policy  of  the  corporation  through  its  charter  and  by- 
laws so  that  it  may  be  operated  for  the  benefit  of  the  mem- 
bers and  not  exclusively  for  the  stockholders.    Some  of 


252  Cooperation  in  Agriculture 

the  supply  companies  sell  materials  to  members  who  are 
not  actually  stockholders  and  at  the  end  of  the  season 
distribute  one-half  as  much  of  the  net  earnings  to  the  mem- 
bers as  they  distribute  to  regular  stockholders. 


METHOD    OF   SELLING   SUPPLIES   TO   THE   MEMBERS 

There  are  two  methods  of  selling  supplies  to  the  mem- 
bers of  a  cooperative  association.  In  one  they  are  sold 
at  the  actual  cost  of  the  supplies  with  an  estimated  per- 
centage added  to  cover  the  cost  of  operation,  interest, 
reserve,  and  depreciation.  In  the  other,  the  prevailing 
retail  market  price  is  charged  for  each  article,  and  the 
profits  are  divided  among  the  members  at  the  end  of  the 
year  in  proportion  to  the  trade  of  each  after  the  reserve, 
the  interest  on  the  capital  stock,  and  the  depreciation  are 
deducted.  In  some  cases  the  profits  made  on  supplies 
are  the  principal  source  of  the  dividends  to  the  stock- 
holders of  a  cooperative  farmers'  organization. 

The  charging  of  the  regular  retail  price  is  generally  to 
be  preferred  in  the  sale  of  supplies.  It  protects  the  local 
dealers  against  ruinous  price  cutting  which  they  must  do 
if  the  cooperative  association  sells  the  supplies  at  cost ;  it 
protects  the  wholesale  dealers  and  manufacturers  who  are 
more  likely  to  give  favorable  quotations  when  they  know 
that  their  goods  will  not  be  sold  at  less  than  the  prevailing 
retail  prices ;  it  tends  to  increase  the  membership  among 
the  non-members  who  learn  of  the  dividends  received 
by  their  neighbors;  and  the  dividend  at  the  end  of  the 
year  has  a  peculiarly  favorable  psychological  influence 
on  the  cooperative  members  which  does  not  occur  when 


Cooperation  in  the  Purchase  of  Supplies      253 

the  equivalent  of  the  dividend  is  distributed  over  the  pur- 
chases throughout  the  year.  In  fact,  without  the  dividend 
at  the  end  of  the  year,  the  member  may  not  know  whether 
the  benefit  that  the  association  is  supposed  to  confer  is  a 
tangible  thing  or  not.  There  are  certain  dangers  in  the 
dividend  system  that  need  to  be  frankly  recognized. 
Members  of  a  cooperative  association  are  likely  to  acquire 
the  dividend  habit  and  to  be  greatly  dissatisfied  when 
dividends  are  not  paid.  There  is  then  a  temptation  on 
the  part  of  the  incompetent  managers  who  are  afraid  of 
losing  their  positions  when  a  dividend  is  not  declared  to 
purchase  a  lower  grade  of  supplies  and  to  raise  the  price 
here  and  there  in  order  to  create  a  dividend.  When  the 
dividends  are  fairly  handled  the  dividend  represents  the 
actual  savings  to  the  members  who  deal  through  a  coop- 
erative association. 

The  system  of  selling  supplies  to  the  members  at  cost 
is  not  often  practiced  by  cooperative  associations.  Many 
of  the  manufacturers  and  wholesale  dealers  refuse  to  quote 
favorable  terms  to  associations  that  sell  in  this  manner, 
because  it  eventually  reduces  the  retail  price  which  the 
local  dealers  charge  to  the  level  of  the  wholesale  cost  price 
of  the  association.  As  soon  as  this  condition  is  brought 
about,  the  members  of  the  association  gain  no  financial 
benefit,  and  the  association  is  likely  to  lose  the  support  of 
its  members.  In  the  handling  of  fertilizers  that  cost 
forty  dollars  a  ton  at  retail,  but  for  which  the  retail  dealer 
pays  thirty  seven  and  a  half  dollars  a  ton,  the  fertilizer 
manufacturers  may  refuse  to  sell  at  wholesale  cost  to  a 
cooperative  association  that  sells  the  fertilizers  to  its 
members  at  that  price  because  the  comparison  of  prices 


264  Cooperation  in  Agriculture 

in  the  community  will  eventually  force  the  local  merchant 
to  sell  the  fertilizer  at  actual  cost. 

A  fruit-growers'  supply  company 

A  better  understanding  of  the  scope  of  a  producers* 
supply  company  may  be  obtained  by  reference  to  the 
articles  of  incorporation  of  a  company  in  California  that 
furnishes  fruit-growers'  supplies. 

ARTICLES  OF  INCORPORATION 

OP  THE 


We,  the  undersigned,  the  majority  of  "whom  are  residents 
of  the  State  of  California,  do  associate  ourselves  for  the  purpose 
of  creating  a  corporation  under  and  according  to  the  laws  of  the 
State  of  CaUf ornia.     To  that  end  we  do  declare  — 

First :    That  the  name  of  said  corporation  is,  and  shall  be 


Second :  That  the  purpose  for  which  it  is  formed  is  to  manu- 
facture, buy,  sell,  and  deal  in  suppUes  of  every  kind  or  natiure 
necessary  or  incidental  to  the  packing,  shipping,  and  marketing 
of  fruits  and  fruit  products,  and  all  other  agricultural  products ; 

To  buy,  sell,  lease,  and  otherwise  acquire  and  dispose  of  prop- 
erty, real,  personal,  or  mixed,  in  any  state  or  territory  of  the 
United  States  or  in  any  foreign  country,  and  to  mortgage  or 
hypothecate  the  same,  and  to  execute  deeds  of  trust,  or  other 
instruments,  as  security  for  the  payment  of  any  indebtedness 
or  obligations  issued  by  this  company ; 

To  purchase,  lease,  or  otherwise  acquire  and  dispose  of  timber 
lands,  timber  rights,  water  and  water  rights  and  mill  sites  in  any 
state  or  territory  of  the  United  States,  or  in  any  foreign  country  ; 

To  buy,  sell,  mill,  and  deal  in  timber  and  timber  products ; 


Cooperation  in  the  Purchase  of  Supplies      255 

To  buy,  sell,  mill,  and  deal  in  paper  and  paper  products  ; 

To  acquire,  hold,  operate,  and  dispose  of  land,  buildings,  ma- 
chinery, ships,  vessels,  privileges,  wharf  franchises,  and  other 
franchises ; 

To  erect  buildings  and  machinery  and  to  construct  wharves; 

To  carry  on  a  general  wharving  business  and  to  operate  mills 
and  machinery  for  the  manufacture  of  lumber,  paper,  paper  pulp, 
packing-house  supplies,  and  all  other  articles  and  materials  of 
every  kind  or  nature  necessary  or  incidental  to  the  packing, 
shipping,  and  marketing  of  fruits  and  fruit  products,  and  all 
other  agricultural  products ;  and  to  do  all  and  every  business 
necessary  to,  and  connected  with,  a  general  packing-house  supply 
business,  lumber  business,  manufacturing  and  wharving  business ; 

To  buy,  build,  operate,  lease,  or  otherwise  acquire  and  dispose 
of  tramways,  electric  railways,  steam  railways,  and  wagon  roads 
for  the  purpose  of  transporting  supplies  and  manufactured  ar- 
ticles incidental  and  necessary  to  the  purpose  of  this  corporation ; 

To  buy,  build,  operate,  or  otherwise  acquire  and  dispose  of 
telephone  and  telegraph  lines  incidental  and  necessary  to  the 
pm-pose  of  this  corporation ; 

To  manufacture,  buy,  sell,  and  deal  in  all  supplies  and  articles 
necessary  for  carrying  on  the  purpose  of  this  corporation ; 

To  act  as  ag^nt  or  factor  in  buying,  selling,  and  dealing  in 
supplies  of  every  kind  necessary  and  incidental  to  the  packing, 
shipping,  and  marketing  of  fruit,  fruit  products,  and  all  other 
agricultural  products ; 

To  acquire  by  purchase  or  otherwise,  and  dispose  of  the  same, 
the  business,  rights,  property,  and  good  wills  of  any  person,  firm, 
association,  or  corporation  conducting  a  business  similar  to  the 
business  of  this  corporation ; 

To  acquire,  by  purchase  or  otherwise,  hold,  sell,  assign,  trans- 
fer, mortgage,  pledge,  or  otherwise  dispose  of,  the  shares  of  the 
capital  stock  of,  or  any  bonds,  seciu*ities,  obligations,  or  other 
evidences  of  indebtedness  created  by  any  other  corporation  or 
corporations  of  the  State  of  California,  or  any  other  state  or  any 
territory  or  in  any  foreign  country,  and  while  the  owner  of  such, 
to  exercise  all  rights,  powers,  and  privileges  of  ownership,  that 


256  Cooperation  in  Agriculture 

an  individual  might  exercise,  including  the  right  to  vote  upon 
the  stocks  and  other  securities ; 

To  aid  in  any  manner,  any  corporation  or  association  of  which 
any  bonds  or  other  securities  or  evidences  of  indebtedness  or 
stock  may  be  acquired  or  held  by  or  issued,  in  the  interest  of 
or  at  the  instigation  of  this  corporation,  and  to  do  any  acts  or 
things  designed  to  protect,  preserve,  improve,  enhance,  the  value 
of,  or  to  make  guarantees  in  respect  to  the  value  of  any  such 
bonds  or  other  securities  or  evidences  of  indebtedness  or  stock. 

Third  :    That  the  City  of ,  County  of 

and  State  of  California,  is  the  place  where  its  principal  business 
is  to  be  transacted. 

Fourth :  That  the  period  of  its  existence  shall  be  fifty  (50) 
years. 

Fifth :  The  number  of  directors  shall  be  fifteen  (15)  and  the 
names  and  residences  of  those  who  are  appointed  for  the  first 
year  are  as  follows  :  — 


Sixth  :  The  amount  of  its  capital  stock  is  Five  Hundred  Thou- 
sand ($500,000.00)  Dollars,  divided  into  fifty  thousand  (50,000) 
shares  of  Ten  ($10.00)  Dollars  each. 

Seventh :  There  has  been  One  Hundred  and  Fifty  ($150.00) 
Dollars  of  the  capital  stock  actually  subscribed,  and  by  the  fol- 
lowing named  persons,  in  the  number  of  shares  and  amounts  set 
opposite  their  names  :  — 

Name  Number  op  Shares  Amount 


The  supply  company  is  organized  as  a  stock  corpora- 
tion, though  it  conducts  its  business  primarily  in  the 
interest  of  the  members.  The  stockholders  are  a  large 
number   of   cooperative    fruit-growers'    associations.     It 


Cooperation  in  the  Purchase  of  Supplies      257 

operates  two  general  departments,  one  a  manufacturing 
department  and  the  other  a  material  supply  division.  In 
the  former  department  it  leases  timber  lands,  operates 
mills,  and  manufactures  box  material  used  in  the  ship- 
ment of  fruit ;  in  the  latter,  it  furnishes  supplies  used  in 
the  packing-houses  and  in  the  orchards.  The  supplies 
which  it  manufactures  are  furnished  at  the  cost  of  the 
material  and  of  manufacture,  which  includes  charges  for 
depreciation  and  maintenance  of  the  manufacturing  de- 
partment, plus  six  per  cent,  on  the  assets  and  capital  de- 
voted to  or  invested  in  the  department.  The  supplies 
used  in  the  orchards  are  sold  to  the  members  at  the  cost 
of  the  supplies. 

In  1911  this  fruit-growers'  company  delivered  more  than 
twelve  million  boxes  to  its  members,  and  three  hundred 
and  forty-seven  thousand  dollars'  worth  of  orchard  and 
other  packing-house  supplies.  These  materials  repre- 
sented five  thousand  individual  orders  and  a  net  saving 
to  the  growers  on  the  material  other  than  the  box  shook 
of  at  least  eighty  thousand  dollars.  In  the  same  year  it 
sold  $105,890  worth  of  fertilizer,  imported  six  hundred 
tons  of  vetch  seed  for  cover  crops,  bought  twenty-eight 
carloads  of  nails  or  approximately  twelve  thousand  kegs 
for  use  in  the  packing-houses,  supplied  ten  million  box 
labels  and  two  billion  fruit  wrappers,  or  approximately 
one  hundred  and  fifty  carloads  of  tissue  paper.  In  con- 
nection with  the  manufacture  of  box  material  it  cut  fifteen 
million  feet  of  lumber,  one-half  of  which  was  used  in  box 
manufacture  and  the  remainder  was  sold  in  the  open 
market. 


CHAPTER  X 
COOPERATION  IN  IRRIGATION 

According  to  the  statistics  of  the  Thirteenth  Census, 
one-third  of  the  irrigated  land  in  the  United  States  in  1909 
was  under  cooperative  enterprises.  There  are  13,739,679 
acres  of  irrigated  land  in  the  United  States  distributed 
over  different  irrigation  enterprises  as  follows :  — 

Acres 

Individual  and  partnership  enterprises 6,258,401 

Cooperative  enterprises 4,646,039 

Commercial  enterprises 1,444,806 

Irrigation  Districts        533,142 

U.  S.  Reclamation  Service 395,646 

Carey  Act  enterprises 288,553 

U.  S.  Indian  Service 173,912 

Total 13,739,499 

"The  most  striking  fact  brought  out  by  this  table,"  says 
R.  P.  Teele,  in  charge  of  Irrigation  Statistics,  Bureau  of 
the  Census,  in  an  address  before  the  Nineteenth  National 
Irrigation  Congress,  "is  the  very  large  percentage  of  the 
acreage  irrigated  by  cooperative,  individual,  and  partner- 
ship enterprises.  Of  the  acreage  irrigated  in  1909,  about 
eighty-four  per  cent  was  included  in  enterprises  of  this 
character,  placing  irrigation  districts  in  this  class.  Of 
the  remaining  sixteen  per  cent,  about  ten  per  cent  is  in- 
cluded in  what  have  been  classified  as  commercial  enter- 
prises—  those  supplying  water  to  parties  who  have  no 

258 


Cooperation  in  Irrigation  259 

interest  in  the  work.  The  remaining  six  per  cent  is  di- 
vided as  follows:  Reclamation  Service,  three  per  cent; 
Carey  Act  enterprises,  two  per  cent ;  and  Indian  Service, 
one  per  cent.  As  there  are  large  enterprises  in  course  of 
development,  these  figures  for  1909  do  not  fully  represent 
the  present  situation.  The  figures  for  1910  gave  the 
Reclamation  Service  about  four  per  cent  of  the  total,  the 
Carey  Act  about  six  per  cent  of  the  total,  and  the  Indian 
Service  about  two  per  cent,  the  decrease  being  principally 
in  individual  and  partnership  enterprises.  Of  the  acreage 
included  in  projects,  the  Reclamation  Service  shows  six 
per  cent,  the  Carey  Act  eight  per  cent,  and  the  Indian 
Service  about  three  per  cent,  the  decrease  being  divided 
between  cooperative  and  individual  and  partnership 
enterprises. 

"All  Reclamation  and  Carey  Act  enterprises  and  many 
of  the  conamercial  enterprises  will  eventually  become 
cooperative.  Classing  these  with  those  already  under  the 
control  of  the  water  users,  leaves  less  than  ten  per  cent  of 
the  acreage  irrigated  in  1909  to  be  served  by  works  which 
are  not  now  or  soon  to  be  controlled  by  those  who  use  the 
water. 

"While  statistics  to  prove  the  statement  are  not  avail- 
able, I  believe  it  safe  to  say  that  in  no  other  industry  in 
this  country  is  there  so  large  a  percentage  of  cooperation." 

PROGRESS   OF   COOPERATIVE   IRRIGATION   ENTERPRISES 

Cooperation  in  irrigation  had  its  origin  in  the  develop- 
ment of  the  arid  lands  of  Utah  by  the  Mormon  colonies. 
The  development  of  the  early  history  is  related  by  Samuel 
Fortier,  who  says :  — 


260  Cooperation  in  Agriculture 

"These  pioneers  had  little  money  of  their  own  and  could 
not  obtain  financial  assistance  from  people  outside  of 
the  state.  Necessity,  therefore,  compelled  them  to  join 
hands  in  undertakings  of  this  kind  which  were  too  large 
for  the  individual  or  a  partnership  of  individuals  to  con- 
struct. It  may  be  said  that  cooperation  is  the  keystone 
of  the  development  of  Utah.  The  success  which  attended 
this  form  of  organization  in  the  building  of  irrigation 
ditches  and  the  utilization  of  water  from  streams  spread  to 
other  industries.  This  is  shown  in  the  cooperative  cream- 
eries, cooperative  canneries,  and  cooperative  stores  that 
abound  in  this  state. 

"From  Utah  as  a  center  this  form  of  organization  spread 
to  other  states.  One  finds,  for  example,  pretty  much 
the  same  type  of  irrigation  enterprise  in  Montana,  Cali- 
fornia, Wyoming,  Nevada,  and  other  states.  In  Colorado 
the  capitalistic  canal,  or  what  the  Census  has  chosen  to 
designate  the  commercial  canal,  was  quite  popular  at 
one  time,  but  many  of  these  enterprises  have  been  re- 
organized as  cooperative  companies. 

"The  history  of  such  organizations  can  be  best  under- 
stood by  reference  to  a  particular  canal,  namely,  the  Logan, 
Hyde  Park,  and  Smithfield  Canal  Company  of  Logan, 
Utah.  This  was  begun  in  June,  188L  The  interest  in 
the  ditch  is  represented  by  stock,  there  being  2498  shares 
having  a  face  value  of  $5  each  and  a  present  market  value 
(June,  1909)  of  $70.  Stock  was  issued  in  pay  for  work 
mainly.  This  company  does  not  figure  on  any  definite 
number  of  shares  to  the  acre.  Some  land  requires  two 
shares  per  acre  for  irrigation,  others  four  or  five.  Each 
share  has  one  vote.     There  are  five  directors  elected  for 


Cooperation  in  Irrigation  261 

a  term  of  two  years,  and  these  elect  their  own  president  and 
vice-president.  The  directors  appoint  a  secretary-treas- 
urer, who  receives  a  small  annual  salary.  The  water 
master  distributes  the  water  under  the  direction  of  the 
board  of  directors.  The  company  controls  all  laterals 
and  shares  except  315  shares  of  stock  held  for  the  town 
of  Smithfield  for  town  use.  Smithfield  is  allowed  one 
director  and  is  practically  under  the  control  of  the  main 
organization.  The  area  of  land  under  the  ditch  is  2500 
acres.  This,  like  other  similar  companies,  is  incorporated 
under  the  law  of  the  state  of  Utah.  The  works  were  con- 
structed by  day  labor  by  the  water  users  under  the  direc- 
tion of  one  of  the  directors,  one  director  taking  charge  of 
a  certain  length  of  canal  and  overseeing  the  job.  A  few 
settlers  borrowed  money  and  paid  cash  for  their  portion 
of  the  cost.  The  annual  assessment  averages  about 
seventy  cents  and  the  total  annual  revenue  about  $1750. 
Dividing  the  total  expenditures  between  the  nine  miles 
of  main  canal  gives  an  annual  cost  of  about  $195  per  mile." 

METHODS     OF     ORGANIZING,    FINANCING,    AND     OPERATING 
WATER   COMPANIES   IN    SOUTHERN    CALIFORNIA 

The  methods  of  organizing,  financing,  and  operating 
water  companies  in  Southern  California  are  described  by 
C.  E.  Tait,  Irrigation  Engineer,  United  States  Depart- 
ment of  Agriculture.  The  methods  are  similar  in  other 
states.     Mr.  Tait  says :  — 

"Water  companies  are  principally  of  two  classes,  public 
service  companies  and  cooperative  or  mutual  companies. 

"Public  service  water  companies  are  private  business 
corporations  that  sell  water  for  profit.     The  capital  stock 


262  Cooperation  in  Agriculture 

theoretically  represents  the  investment  or  the  cost  of 
water  rights,  water-bearing  lands,  work  done  in  develop- 
ing water,  and  of  irrigation  works.  The  companies  deliver 
water  to  users  at  fixed  rates,  the  charges  sometimes  being 
so  much  per  irrigation  per  acre  with  a  minimum  charge 
for  the  season,  but  more  often  being  in  proportion  to  the 
quantity  of  water  used.  Until  the  passage  of  the  Public 
Utilities  Act,  the  law  of  California  made  it  the  duty  of 
county  supervisors  when  properly  petitioned  by  a  certain 
number  of  taxpaying  citizens  to  fix  the  rates  charged  by 
a  public  service  company  to  give  a  fair  profit  on  the  value 
of  the  system.  In  many  cases  no  request  was  made  to 
have  the  rates  fixed  according  to  law,  and  the  water  charges 
have  been  regulated  by  contract  between  company  and 
users,  the  latter  often  being  dealt  with  as  an  incorporated 
mutual  company  having  its  own  distributing  system. 
Such  contracts  are  accepted  where  rates  have  not  been 
officially  established,  but  cannot  be  made  to  conflict  with 
legal  rates.  Sometimes  a  bonus  or  its  equivalent  has  been 
exacted  from  the  water  users  in  addition  to  the  water 
charge,  but  companies  of  this  class  can  be  forced  to  give 
reasonable  public  service  without  discrimination  and  with- 
out collecting  a  bonus.  The  Public  Utilities  Act  of  1911 
gives  the  State  Railroad  Commission  power  to  not  only 
fix  the  rates  of  public  service  water  companies,  but  to 
practically  regulate  their  entire  business,  including  manner 
of  service,  measurement,  accounting,  incurrence  of  in- 
debtedness, etc. 

"Cooperative  or  mutual  water  companies  are  organized 
by  land-owners  for  the  purpose  of  supplying  water  for  the 
irrigation  of  their  own  lands  at  cost  and  without  profit  to 


Cooperation  in  Irrigation       ■  263 

any  one.  A  mutual  company  is  a  special  form  of  private 
company  in  which  the  stock  represents  water  rights  and 
is  owned  entirely  by  those  to  be  served,  the  classification 
being  one  of  general  custom  rather  than  a  legal  distinction. 
Most  of  the  mutual  companies  originated  in  one  of  three 
ways:  some  grew  out  of  the  failures  of  state  irrigation 
districts;  others  were  promoted  and  fostered  by  land 
companies;  and  still  others  were  organized  by  settlers 
directly,  without  the  aid  of  other  agencies. 

"Many  districts  were  organized  in  Southern  California 
soon  after  the  passage  of  the  State  Irrigation  District  Law, 
and  most  of  these  failed,  because  of  insufficient  water 
supply,  mismanagement  of  funds,  defects  in  the  law  itself, 
and  various  other  reasons.  Where  the  districts  had  been 
for  worthy  projects,  mutual  water  companies  were  or- 
ganized to  succeed  them,  the  companies  taking  over  the 
property  of  the  districts  at  its  value. 

"It  is  probable  that  a  majority  of  the  mutual  water 
companies  originated  subsidiary  or  promotion  companies 
having  lands  to  sell.  The  promotion  or  parent  companies 
were  usually  known  as  'land  and  water  companies.'  Their 
methods  were  to  acquire  large  tracts  of  land,  often  Spanish 
claims,  and  subdivide  these  for  sale  to  settlers.  They 
also  developed  and  provided  water  for  the  irrigation  of 
the  land  they  had  for  sale.  They  then  caused  the  or- 
ganization of  mutual  water  companies,  the  latter  as  a  rule 
having  only  a  few  first  settlers,  perhaps  stockholders  or 
agents  of  the  parent  company,  as  the  original  members. 
The  usual  method  was  to  turn  the  capital  stock  of  the  mu- 
tual company  over  to  the  parent  company  in  exchange  for 
the  water  system.     The  system  would  include  the  water 


264  Cooperation  in  Agriculture 

rights,  as  well  as  canals,  pipe  lines,  pumping  plants,  reser- 
voirs, and  such  other  works  as  might  have  been  constructed 
by  the  parent  company.  The  parent  company  would 
then  reimburse  its  treasury  by  selling  shares  of  stock  in 
the  mutual  company,  together  with  land,  to  settlers. 
In  this  way  the  control  of  the  mutual  company,  which 
originally  rested  in  the  parent  company,  passed  to  the 
settlers  as  soon  as  more  than  one-half  of  the  shares  had 
been  sold. 

"Other  mutual  companies  were  organized  by  land- 
owners directly,  who  associated  for  the  development  of 
water  resources  and  the  construction  of  irrigation  works. 
In  such  cases  the  systems  were  built  a  little  at  a  time  and 
not  completed  for  several  years  after  the  work  was  begun, 
this  being  the  result  of  the  way  funds  were  secured  for 
construction.  Funds  have  been  raised  by  subscribing 
capital,  by  direct  assessment  of  the  capital  stock,  by  small 
loans  and  by  bonds.  In  a  few  cases  the  settlers  cooper- 
ated in  building  works  by  their  own  labor.  Bond  issues 
must  be  authorized  by  a  two-thirds  of,  and  must  not 
exceed  the  amount  of,  the  subscribed  capital  stock.  Mu- 
tual company  bonds  are  not  as  marketable  as  municipal 
bonds  except  where  the  issue  is  large  enough  to  justify 
special  investigation  of  the  project  by  bond  buyers. 
Bonds  of  small  mutual  companies  have  been  disposed  of 
through  contractors  doing  the  work  for  which  the  bonds 
were  issued.  Banks  frequently  loan  money  to  mutual 
companies  of  recognized  standing  on  corporation  notes 
and  to  new  mutual  companies,  provided  the  notes  are 
indorsed  by  directors  or  stockholders  personally  able  to 
furnish  the  required  security.     Some  of  the  most  efficient 


Cooperation  in  Irrigation  265 

irrigation  systems  in  Southern  California  and  in  the 
United  States  have  been  constructed  piece  by  piece  by 
land-owners  with  no  other  aid  than  small  loans  from  local 
banks. 

"Under  some  of  the  mutual  companies  in  the  fruit  dis- 
tricts it  was  originally  intended  to  have  one  share  of  stock, 
with  par  value  of  $100,  for  each  acre  to  be  irrigated.  As  a 
rule  a  share  represented  the  equivalent  of  one-tenth  miner's 
inch  of  water  flowing  continuously,  although  this  varied 
to  some  extent.  Sometimes  there  were  ten  shares  per 
acre,  with  par  value  of  SIO,  so  that  the  valuation  per  acre 
and  per  miner's  inch  was  about  the  same.  Experience 
proved  that  one  miner's  inch  was  hardly  sufficient  for  ten 
acres  of  mature  citrus  orchards,  but  that  it  was  enough 
for  seven  or  eight  acres.  Extra  shares  in  water  com- 
panies were  purchased  by  orchardists  to  provide  the 
additional  water  needed  for  full-grown  trees,  so  that  the 
par  value  of  an  acre  water  right,  based  on  present  use,  is 
about  $125.  Under  other  companies  one  miner's  inch 
served  only  five  acres  from  the  start.  The  market  value  of 
shares  is  influenced  by  supply,  demand,  and  various  local 
conditions  as  well  as  the  original  cost,  and  acre  rights  are 
now  valued  at  from  $100  to  $300  for  citrus  fruits. 

"A  mutual  company  may  legally  provide  in  its  by-laws 
that  each  of  the  shares  or  water  rights  be  appurtenant  to 
certain  land,  but  often  the  water  is  instead  made  appur- 
tenant to  the  entire  tract  as  a  whole  which  the  irrigation 
system  serves,  then  stock  may  be  transferred  within  the 
tract  separately  from  the  land  if  the  transaction  is  entered 
on  the  books  of  the  company. 

''There  is  no  fixed  rule  by  which  mutual  companies 


266  Cooperation  in  Agriculture 

provide  funds  for  expenses.  Some  secure  all  money  by 
stock  assessments;  others  by  a  charge  for  the  water  de- 
livered. The  most  satisfactory  plan  is  to  assess  the  stock 
for  maintenance  and  permanent  improvements  and  to 
have  a  water  charge  to  meet  operating  expenses.  Since 
betterments  to  the  property  enhance  the  value  of  the  stock, 
the  shares  should  be  the  basis  of  payment  for  such  work. 
Operating  expenses  should  be  distributed  among  members 
according  to  the  service  rendered  each,  for  water  is  not 
always  used  in  proportion  to  the  number  of  shares  held 
by  each. 

"Most  mutual  companies  deliver  water  to  stockholders 
only,  but  some  deliver  to  non-members  when  service  to 
members  is  not  interfered  with.  The  water  charge  to 
non-members  is  at  a  higher  rate,  especially  where  the 
company's  stock  is  assessed.  The  unit  of  measurement 
and  of  the  charge  in  the  orchard  districts  is  the  miner's 
inch  per  hour.  Charges  to  mutual  company  members 
vary  from  one-half  cent  per  hour  inch  for  gravity  water 
to  three  cents  per  hour  inch  for  water  pumped  with  a  high 
lift.  The  cost  of  water  per  acre  for  citrus  orchards  varies 
from  $5  to  $20  per  year  except  in  extreme  cases.  The 
higher  figure  is  representative  where  interest  and  prin- 
cipal is  being  paid  on  bonded  indebtedness,  and  the  lower 
figure,  where  there  is  no  indebtedness,  and  gravity  water. 
The  Imperial  Valley  mutual  companies  use  the  acre  foot 
as  the  unit  of  quantity  and  the  cubic  foot  per  second  as 
the  unit  of  measurement  of  flowing  water.  The  water 
rental  is  50  cents  per  acre  foot,  while  the  stock  assessments 
amount  to  $1  to  $1.50  per  acre  annually.  Alfalfa  in 
this  valley  requires  from  three  to  three  and  one-half  acre 


Cooperation  in  Irrigation  267 

feet  of  water  per  acre  each  year  and  most  other  crops 
more  than  half  as  much. 

"Mutual  companies  are  controlled  by  a  Board  of  Direc- 
tors elected  annually  by  the  stockholders.  The  directors 
elect  one  of  their  number  president.  The  Secretary  keeps 
the  books  and  records  and  computes  and  collects  charges 
for  water.  The  work  of  water  delivery  and  maintenance 
is  placed  in  charge  of  a  superintendent.  Large  companies 
have  zanjeroes  to  assist  in  delivering  water. 

"When  the  crops  under  an  irrigation  system  are  of  the 
same  class,  such  as  citrus  fruits,  it  is  usual  to  deliver  water 
by  rotation.  A  stream  or  head  is  used  in  succession  by 
stockholders  along  a  lateral  pipe  or  ditch,  the  complete 
circuit  or  rotation  being  completed  in  a  specified  time, 
usually  about  thirty  days,  and  the  time  of  use  by  each 
stockholder  being  proportional  to  the  number  of  his  shares. 
Schedules  of  rotation  are  made  in  advance  for  the  entire 
season,  so  that  each  stockholder  knows  the  time  of  the 
month  that  he  is  to  have  the  water.  The  water  need 
be  measured  only  at  the  head  of  the  lateral,  then  the  num- 
ber of  hours  that  the  water  is  used  by  each  stockholder 
when  recorded  is  sufficient  to  compute  the  water  charge. 
Heads  from  thirty  to  sixty  miner's  inches  are  delivered 
for  ten-acre  citrus  orchards,  and  the  length  of  an  irrigation 
ranges  from  twelve  to  forty-eight  hours.  Sandy  soil 
requires  a  large  head  for  a  short  time,  while  tight  soil 
requires  a  small  head  for  a  longer  time.  Where  the  crops 
under  a  system  are  diversified,  delivery  by  rotation,  al- 
though the  most  economical,  is  not  always  practical  on 
account  of  the  different  water  requirements  of  the  crops 
as  to  time  and  frequency  of  irrigation  and  the  size  of  head. 


268  Cooperation  in  Agriculture 

In  such  cases  it  is  usual  to  deliver  on  order  of  the  stock- 
holder within  certain  reasonable  limitations,  the  water 
being  measured  at  each  delivery  point.  Each  stockholder 
may  be  entitled  to  a  certain  amount  of  water  each  month, 
preference  of  time  of  delivery  being  in  order  of  applica- 
tion. 

"Mutual  water  companies  are  incorporated  in  California 
under  the  law  for  the  incorporation  of  private  companies. 
Three  or  more  persons  may  incorporate.  Articles  of  in- 
corporation as  prescribed  by  law  must  be  filed  with  the 
county  and  the  state,  whereupon  the  latter  issues  a  certifi- 
cate of  incorporation.  The  articles  should  declare  the 
purpose  of  the  organization  broadly  enough  to  permit  the 
conduct  of  all  business  unhampered,  but  should  state  that 
water  is  not  to  be  sold  for  profit.  The  corporation  should 
then  adopt  by-laws  that  are  consistent  with  the  consti- 
tution and  laws  of  the  state.  The  by-laws  should  specify 
the  duties  of  the  officers,  regulate  the  service,  and  define 
the  relations  of  stockholders  to  the  company.  In  the 
light  of  present  experience  only  a  few  suggestions  may  be 
made  for  new  organizations  regarding  changes  from  the 
usual  form  and  methods  of  the  better  companies  now 
operating.  The  water  should  be  capitalized  at  a  figure 
that  will  cover  the  entire  cost  of  making  it  available  for 
the  irrigation  of  the  land,  exclusive  of  operating  expense. 
This  usually  includes  cost  of  real  estate,  water  rights, 
rights  of  way,  construction  of  works,  engineering,  and  all 
incidentals  to  preparing  the  system  for  service.  A  fair 
capitalization  for  pumped  water  in  the  fruit  districts  is 
$1000  per  miner's  inch.  As  there  is  practically  no  surface 
water  without  storage  left  for  appropriation  in  the  streams 


Cooperation  in  Irrigation  269 

of  Southern  California,  the  value  of  gravity  water  now 
exceeds  its  original  capitalization  and  varies  more  than  the 
value  of  pumped  water.  It  reaches  $2500  per  miner's  inch 
in  some  localities.  Small  shares  of  stock  are  convenient 
and  require  less  dealing  in  fractional  shares.  If  the  capital 
stock  be  divided  in  shares  of  par  value  $10  each,  then  in  the 
case  of  pumped  water  at  $1000  per  miner's  inch,  each  share 
entitles  the  holder  to  the  use  of  one-hundredth  part  of  a 
miner's  inch ;  and  if  a  miner's  inch  serves  eight  acres,  the 
stockholder  with  a  ten-acre  orchard  will  have  one  hundred 
and  twenty-five  shares. 

"It  is  not  necessary  that  the  number  of  shares  to  the 
acre  be  specified,  for  there  are  other  ways  to  encourage  the 
economical  use  of  water,  but  it  is  recommended  that  the 
water  or  the  shares  representing  water  rights  be  made  ap- 
purtenant to  the  land  to  be  irrigated  by  the  system  and 
to  the  adjacent  lands.  The  adjacent  lands  are  included 
only  because  water  may  sometimes  be  used  more  economi- 
cally than  is  expected,  in  which  case  some  of  the  shares  may 
be  transferred  to  land  joining  the  original  tract  and  the 
service  of  the  company  extended  without  increasing  water 
supply  or  capital  stock.  There  is  a  disadvantage  in  a 
member  owning  more  shares  than  necessary  for  the  irri- 
gation of  his  land,  as  the  stock  is  assessed  for  the  mainte- 
nance of  the  system,  and  this  together  with  the  provision 
for  appurtenance  prevents  speculation  in  stock.  Where 
there  is  no  indebtedness,  assessments  need  not  be  levied 
annually  but  only  as  required  by  new  works,  extensions, 
or  special  repairs.  A  water  rental  or  charge  just  sufficient 
to  meet  the  ordinary  or  operating  expenses  is  consistent 
with  the  stated  purpose  of  a  mutual  or  non-profit  company, 


270  Cooperation  in  Agriculture 

and  it  not  only  fairly  apportions  the  cost  of  water  delivery 
among  the  members,  but  it  also  very  effectually  induces 
economy  in  the  use  of  water  by  members.  Such  a  charge 
may  be  adjusted  annually  by  the  directors  in  considera- 
tion of  whether  a  surplus  or  a  deficit  was  produced  the 
previous  year. 

''The  mutual  water  company  has  been  the  most  success- 
ful form  of  irrigation  organization  in  Southern  California, 
and  its  efficiency  has  been  demonstrated  elsewhere  in  this 
and  other  states.  The  largest  mutual  companies  in  the 
citrus  belt  irrigate  about  20,000  acres.  The  largest  mutual 
company  in  the  United  States  is  in  Imperial  Valley  and 
irrigates  100,000  acres." 


CHAPTER  XI 

RURAL  CREDIT 

In  many  European  countries  the  farmers  have  organized 
banking  systems  on  the  cooperative  plan  through  which  to 
supply  credit  to  carry  on  their  farming  operations.  There 
are  several  forms  of  rural  credit  institutions  abroad. 
Three  leading  systems  originated  in  Germany :  first,  the 
Raiffeisen,  or  rural  credit  banks,  which  were  founded  in 
1849  by  Herr  Raiffeisen,  a  burgomaster  of  Weyerbusch; 
second,  the  Schulze-Delitzsch,  which  are  part  rural  and  part 
urban  credit  banks,  founded  about  the  same  time  by  Herr 
Schulze,  mayor  of  Delitzsch ;  and,  third,  the  cooperative 
non-profit  societies,  the  Landschaften  as  they  are  called, 
organized  within  a  province  and  obtaining  credit  for  the 
members  by  means  of  bonds  guaranteed  by  the  land- 
owners of  the  province  collectively.  The  Landschaften 
banks  originated  during  the  last  of  the  eighteenth  century. 
The  Raiffeisen  and  Schulze-Delitzsch  banks  were  organ- 
ized after  Germany  had  passed  through  a  terrible  famine 
in  1846  and  1847.  There  was  great  distress  among  the 
small  farmers,  who,  on  account  of  the  social  and  economic 
conditions  then  prevailing,  were  thrown  into  the  hands  of 
the  unprincipled  usurers  from  whom  alone  they  could 
obtain  the  necessary  credit  to  carry  on  their  business. 
These  systems  of  credit  have  been  widely  adopted  in 

271 


272  Cooperation  in  Agriculture 

Europe,  Asia,  and  in  Canada,  but  not  to  any  extent  in 
the  United  States. 

NATIONAL   INTEREST   IN   RURAL    CREDIT 

There  is  a  general  interest  in  the  subject  of  rural  credit 
in  the  United  States  on  account  of  the  high  rate  of  interest 
which  the  farmer  is  supposed  to  pay  for  his  credit  when 
compared  with  other  lines  of  business  and  the  difficulty  of 
obtaining  ample  credit  in  some  parts  of  the  country.  In 
foreign  countries,  the  governments  play  an  important 
part  in  the  development  of  the  cooperative  method  of 
conducting  business,  but  it  is  only  recently  that  Mr. 
Roosevelt,  through  the  appointment  of  the  Country  Life 
Commission,  directed  the  attention  of  the  coimtry  to  the 
need  of  a  wide  application  of  the  cooperative  method  to 
the  solution  of  rural  life  problems,  that  our  own  govern- 
ment has  taken  official  cognizance  of  the  cooperative 
method  as  a  means  of  upbuilding  better  farming  and  bet- 
ter rural  business  conditions.  The  comprehensive  mono- 
graph ^  of  the  European  systems  of  rural  credit  by  Dr. 
Lorenzoni  of  the  International  Institute  of  Agriculture 
still  further  stimulated  the  interest  and  led  the  Southern 
Commercial  Congress  to  hold  a  conference  on  rural  finance 
in  Nashville,  Tennessee,  in  April,  1912,  and  to  organize 
a  commission  representing  each  of  the  states  to  go  abroad 
in  1913  to  study  the  systems  of  rural  credit  and  to  report 
to  the  International  Institute  of  Agriculture,  the  com- 
mission having  been  indorsed  by  a  joint  resolution  passed 
in   the   Senate    of   the    United    States.     The   American 

1  "An  Outline  of  the  European  Co5peration  Credit  Systems,"  Inter- 
national Institute  of  Agriculture,  Rome,  1912. 


Rural  Credit  273 

Bankers'    Association    has    also  investigated    the    rural 
credit  question  abroad. 

As  a  result  of  the  widespread  interest  in  the  subject, 
the  credit  welfare  of  the  American  farmer  has  suddenly- 
become  a  live  public  question.  The  62d  Congress  author- 
ized the  President  to  investigate  the  operations  of  the 
cooperative  land  mortgage  banks  and  cooperative  rural 
credit  unions  as  they  relate  to  agriculture  and  rural  con- 
ditions in  foreign  countries.  Through  the  diplomatic 
officers  in  Europe  the  Department  of  State  has  been  inves- 
tigating the  question,  and  a  preliminary  report  has  been 
prepared  by  Ambassador  Herrick  and  has  been  trans- 
mitted to  the  governors  of  the  states  by  President  Taft, 
together  with  his  suggestions  concerning  the  establish- 
ment of  a  rural  credit  system  in  the  United  States.  The 
President  has  also  invited  the  governors  at  the  next 
annual  conference  with  him  "to  consider  means  for  the 
adoption  of  an  agricultural  credit  system  as  a  benefit  to 
the  American  farmer."  In  order  that  the  requirements 
of  the  farmer  shall  not  be  overlooked,  each  of  the  three 
leading  political  parties  in  their  platforms  in  1912  recom- 
mended an  investigation  of  the  foreign  agricultural  credit 
systems  so  that  it  may  be  ascertained  whether  a  rural 
credit  system  may  be  adapted  to  the  conditions  of  the 
United  States.  The  abundance  of  the  interest  of  so  many 
agencies  in  the  farmers'  credit  welfare,  insures  a  wide 
consideration  of  the  relation  of  our  banking  system  to  the 
needs  of  agriculture  and  in  the  end  should  result  in  a 
more  elastic  rural  financial  system. 


274  Cooperation  in  Agriculture 

COOPERATIVE     CREDIT     UNIONS     IN     THE     UNITED     STATES 

Thera  are  a  number  of  cooperative  credit  unions  in  the 
United  States  and  in  Canada,  especially  in  the  Province 
of  Quebec,  where  there  are  a  number  of  mutual  banks  that 
furnish  credit  to  the  farmers.  In  Massachusetts,  the 
cooperative  credit  unions  have  been  encouraged  by  the 
enactment  of  laws  permitting  the  incorporation  of  credit 
unions.  The  Meyrick  credit  union  at  Springfield  was  the 
first  to  incorporate  under  the  law,  and  at  the  end  of  one 
year  it  had  105  members,  a  capital  of  $3000,  and  S10,000 
in  outstanding  loans.  In  1911,  thirteen  new  unions  were 
formed,  with  a  combined  capital  of  $25,000. 

THE  JEWISH   CREDIT  UNIONS 

The  Jewish  Agricultural  and  Industrial  Aid  Society, 
according  to  data  furnished  by  Mr.  Leonard  G.  Robinson, 
the  General  Manager,  has  established  eight  credit  unions 
during  the  past  two  years,  with  a  membership  in  June, 
1912,  of  240.  They  have  836  shares  outstanding,  with 
a  total  capital  of  $4180.  These  unions  have  been  in 
operation  on  the  average  seven  months,  and  during  that 
time  they  have  granted  loans  aggregating  $17,755,  or 
more  than  four  times  the  capital.  The  repayments 
have  amounted  to  $7525.52,  or  nearly  one-half  of  the 
amount  loaned.  Their  net  profits  for  the  period  amount 
to  $308.65,  or  at  the  rate  of  more  than  12|  per  cent 
per  annum,  all  of  which  has  been  placed  in  the  reserve 
fund. 

The  plan  of  these  credit  unions  is  set  forth  in  the  Annual 
Report  of  the  society  for  1911  as  follows  :  — 


Rural  Credit  275 

"Our  plans  for  the  establishment  of  cooperative  credit 
associations  or  banks,  which  we  had  under  consideration 
for  the  past  two  years,  and  of  which  mention  was  made  in 
our  last  annual  report,  have  this  year  materialized,  and 
we  now  have  three  such  associations  in  operation:  the 
Jewish  Farmers'  Cooperative  Credit  Union  of  Rensselaer 
County,  New  York;  the  Jewish  Farmers'  Cooperative 
Credit  Union  of  Fairfield  County,  Connecticut;  and  the 
Jewish  Farmers'  Cooperative  Credit  Union  of  Ellington, 
Connecticut." 

The  objects  of  these  Credit  Unions  are  fully  set 
forth  in  their  'Articles  of  Association,'  which  are  here 
quoted :  — 

"Whereas,  a  system  of  personal  credit,  whereby  short-term 
loans  for  productive  purposes  can  be  obtained  for  moderate 
amounts  and  on  easy  terms,  is  of  prime  importance  to  those  en- 
gaged in  agriculture ;   and 

"Whereas,  our  faith  in  the  benefits  of  cooperation  and  mutual 
self-help  leads  us  to  believe  that  a  loan  association  managed  co- 
operatively will  best  satisfy  the  needs  and  conserve  the  interests 
of  the  Jewish  farmers  in  the  vicinity ;  be  it 

"Resolved,  that  we,  the  Jewish  farmers  of ,  hereby 

associate  ourselves  into  a  voluntary  or  unincorporated  associa- 
tion to  carry  out  the  objects  above  set  forth." 

"Each  of  these  Credit  Unions  raised  $500  through  the 
sale  of  shares  to  members,  and  our  Society  loaned  them 
$1000  —  two  dollars  for  every  dollar  raised  among  them- 
selves —  bearing  interest  at  the  rate  of  two  per  cent  per 
annmn.  The  three  Credit  Unions  commenced  operations 
May  1.  The  results  of  their  operations  for  the  fiscal 
year  ending  September  30  —  a  period  of  five  months  — 
are  given  below :  — 


276 


Cooperation  in  Agriculture 


Rensselaer 
Ck)CNTT,N.Y. 

Fairfield 
County,  Ct. 

Ellington, 
Ct. 

Totals 

Number  of  members 

35 

25 

24 

84 

Number  of  shares 

105 

102 

101 

308 

Number  of  loans 

31 

17 

18 

66 

Amount  of  loans 

$1695.00 

$1275.00 

$1490.00 

$4460.00 

Average  per  loans 

54.68 

75.00 

82.78 

67.57 

Principal  repaid 

474.00 

547.00 

158.00 

1179.00 

"The  net  profits  of  the  three  Credit  Unions  for  the 
five  months  were  $61.93,  or  at  the  rate  of  over  9|  per  cent 
per  annum  on  their  capital. 

"The  form  of  organization  of  these  Credit  Unions  is 
similar  to  that  of  the  Raiffeisen  Banks  in  Germany,  upon 
which  most  other  credit  banks  throughout  the  world  are 
modeled.  They  are  controlled  entirely  by  the  members. 
Shares  in  these  Credit  Unions  are  $5  each,  and  the 
holder  of  one  share  has  the  same  voice  and  the  same  rights 
as  the  holder  of,  say,  100  shares.  Membership  in  these 
Unions  is  open  only  to  members  in  good  standing  of  the 
local  Jewish  Farmers'  Associations.  The  entire  member- 
ship of  a  Credit  Union  constitutes  the  General  Assembly, 
which  has  the  final  decision  on  all  questions.  The  direct 
management  is  in  the  hands  of  a  Board  of  Directors  of 
seven  members,  four  of  whom  are  the  officers,  namely, 
the  President,  Vice  President,  Secretary,  and  Treasurer. 
The  four  officers  also  constitute  the  Credit  Committee 
and  are  in  complete  charge  of  the  granting  of  loans.  The 
other  three  members  of  the  Board  constitute  a  Super- 
visory Committee,  whose  duty  it  is  to  audit  the  books 


Rural  Credit  277 

and  to  supervise  the  acts  of  the  Credit  Committee.  Ap- 
peals from  the  Credit  Committee,  as  well  as  from  the 
Supervisory  Committee,  can  be  taken  to  the  General 
Assembly.  The  members  of  the  Board  of  Directors  are 
not  eligible  to  borrow  except  by  a  two-thirds  vote  of  the 
General  Assembly  in  each  instance.  The  loans  are 
granted  only  for  productive  purposes  or  urgent  needs. 
They  are  not  granted  for  a  period  exceeding  six  months 
nor  for  an  amount  exceeding  $100.  Interest  is  charged 
at  the  rate  of  six  per  cent,  and  is  payable  in  advance. 
The  security  is  determined  by  the  Credit  Committee, 
and  is  generally  the  promissory  note  of  the  borrower 
with  one  or  more  responsible  indorsements.  Initiation 
fees  and  other  charges,  also  so  much  of  the  net  profits  as 
have  not  been  distributed  as  dividends,  constitute  the 
Reserve  Fund  of  the  Credit  Unions." 

THE  COST  OF  CREDIT  TO  THE  AMERICAN  FARMER 

The  indebtedness  of  the  American  farmer  is  approxi- 
mately six  billion  dollars,  on  which  an  annual  interest 
charge  of  510  million  dollars  is  paid.^  There  are  twelve 
million  farmers  in  the  United  States  and  they  add 
each  year  to  the  National  wealth  $8,400,000,000.  They 
pay  an  average  interest  rate  of  8|  per  cent.  The  rate  of 
interest  paid  by  the  farmer,  as  the  President  points  out,  is 
considerably  higher  than  that  paid  by  industrial  corpora- 
tions, railroads,  and  municipalities,  yet  the  security  offered 
by  the  farmer  in  the  land  on  which  his  crops  are  grown 
is  as  stable  as  the  securities  offered  by  the  corporations 
mentioned.     This  condition  of  affairs  is  due  to  the  fact 

1  Letter  of  President  Taft  to  the  governors  of  States,  October,  1912. 


278  Cooperation  in  Agriculture 

that  our  financial  system  has  not  been  developed  to  meet 
the  needs  of  American  agriculture,  and  the  farmer  is  handi- 
capped by  not  being  able  to  negotiate  loans  by  offering 
the  land  as  security  for  his  most  necessary  credit  needs, 
or  to  utilize  his  character  as  an  asset  for  personal  credit 
to  the  extent  that  a  member  of  a  foreign  cooperative 
union  may  do. 

A  better  understanding  of  the  subject  may  be  had  by  a 
brief  discussion  of  the  credit  requirements  of  the  farmer 
and  of  his  present  means  of  obtaining  the  credit  he  needs. 

The  American  farmer  needs  credit  to  make  permanent 
improvements  to  his  property,  to  increase  its  productive 
power,  and  for  short-term  purposes  to  be  used  for  current 
expenses  while  his  crops  or  products  are  maturing  and 
especially  to  provide  for  the  harvesting  and  movement 
of  the  crops.  He  now  has  three  general  ways  of  obtain- 
ing credit:  by  borrowing  from  an  individual  or  other 
private  agency  on  such  terms  as  the  two  agree  upon; 
by  obtaining  credit  from  a  local  store  or  other  mercantile 
institution,  giving  as  security,  if  necessary,  a  mortgage 
or  lien  upon  his  crop ;  and  by  borro\^'ing  money  from  a 
bank,  an  insurance  company,  loan  and  trust  company, 
or  other  institution,  giving  such  security  as  these  agencies 
require.  He  sometimes  obtains  credit  by  using  a  ware- 
house receipt  for  grain,  cotton,  tobacco,  fruit,  or  other 
crop  as  security  for  a  loan. 

The  Individual  Credit  System 

Under  the  individual  credit  system  a  farmer  usually 
secures  money  from  a  local  farmer  or  neighbor  or  a 
resident  or  distant  agent  who  has  money  to  loan.     For 


Rural  Credit  27^ 

a  long-time  loan  for  permanent  improvement  he  usually 
gives  a  mortgage  on  the  land ;  for  a  short-time  loan  for 
current  expenses,  a  note  properly  secured,  a  crop  lien,  or 
other  form  of  chattel  mortgage  or  personal  security. 
Some  of  the  loan  agents  deal  honorably  with  the  farmers, 
but  the  unscrupulous  acts  of  money  lenders  in  foreclosing 
mortgages  so  as  to  obtain  the  farm  below  its  value  and 
other  acts  not  less  honorable  have  given  the  unscrupulous 
individual  loan  agent  or  money  lender  the  name  of  "land 
shark,"  and  have  made  this  form  of  rural  credit  one  of 
the  most  dangerous  and  expensive  for  the  average  farmer 
to  use. 

The  Crop  Lien 

Another  form  of  individual  credit  is  the  common  prac- 
tice of  those  who  market  the  products  of  the  farm  to  ad- 
vance money  to  the  farmers  in  the  spring  to  carry  on  their 
current  seasonal  operations,  taking  as  security  a  mort- 
gage or  lien  on  the  crop.  The  system  is  the  outcome  of 
the  personal  relations  that  exist  between  the  producer 
and  those  who  handle  his  crops.  The  commission  mer- 
chant, jobber,  auction  company,  or  warehouseman  who 
furnishes  the  money,  of  course,  reserves  the  exclusive 
right  to  handle  the  crop,  and  he  is  able  to  dictate  the  con- 
ditions under  which  the  crop  is  to  be  sold.  In  many  of 
the  truck-growing  and  fruit-growing  sections  of  the  coun- 
try this  system  of  credit  is  the  most  common  method  by 
which  capital  is  provided  to  the  rural  classes,  and  it  is  the 
only  method  by  which  many  of  the  farmers  can  secure  the 
necessary  capital  to  conduct  their  seasonal  operations. 
In  the  southern  states  a  large  proportion  of  the  cotton 


280  Cooperation  in  Agriculture 

farmers,  especially  the  tenant  farmers,  secure  their  credit  in 
this  way.  While  the  system  is  not  wholly  bad,  it  is  often 
accompanied  by  the  gravest  abuses.  By  the  manipulation 
of  the  crop,  the  unscrupulous  dealer  can  keep  the  farmer 
indebted  to  him  continuously.  The  farmer  may  lose  his 
independence,  he  is  under  the  control  of  the  dealer  who 
handles  his  crop,  and  he  often  pays  an  enormous  rate  of 
interest  indirectly  as  a  result  of  the  way  in  which  his 
crop  is  manipulated  by  the  dealer.  Under  the  chattel 
mortgage  system  the  farmer  may  be  prevented  from  mak- 
ing permanent  improvements  on  his  property,  and  he  is 
likely  to  be  in  a  condition  of  continual  financial  slavery 
to  the  unscrupulous  agents  who  handle  his  business. 
Unless  the  crop  is  an  unusual  one  and  the  prices  are 
abnormally  high,  he  may  never  be  lifted  out  of  debt. 

The  Store  Credit  System 

Under  the  store  credit  system,  of  which  there  are  many 
forms,  the  store  gives  the  farmer  the  right  to  purchase  the 
fertilizer,  tools,  feed,  wagons,  and  other  necessities  needed 
in  the  household  or  on  the  farm.  This  form  of  credit  is  for 
current  expenses  and  not  for  permanent  improvements  on 
the  property.  The  storekeeper  does  not  often  loan  money, 
though  sometimes  the  farmer  can  secure  direct  loans 
by  giving  a  crop  lien  or  other  form  of  chattel  mortgage 
as  security.  If  the  character  of  the  farmer  is  good 
and  the  risk  reasonably  safe,  the  credit  may  not  need 
to  be  secured,  and  the  bills  that  have  accumulated  at  the 
store  during  the  season  are  paid  when  the  crops  are  sold. 
Where  the  reputation  of  the  farmer  is  less  certain  and 
the  risk  correspondingly  greater,  and  where  the  methods 


Rural  Credit  281 

of  farming  are  shiftless,  the  credit  may  be  secured  by  a  crop 
mortgage  or  Hen.  The  store  system  of  credit  in  one  form 
or  other  has  dominated  the  rural  life  in  the  cotton-growing 
states,  in  the  past,  and  it  is  in  common  use  to  a  greater 
or  less  extent  in  every  rural  community.  In  the  South  it 
is  combined  with  a  crop  lien  or  chattel  mortgage  form  of 
security.  It  has  proved  to  be  a  haphazard,  unsystematic, 
extravagant,  and  often  vicious  system  for  both  the  store- 
keeper and  the  farmer.  It  prevents  the  permanent  im- 
provement of  a  community.  It  is  based  on  a  false  se- 
curity, because  the  lien  or  mortgage  is  given  on  the  crop 
before  it  is  developed  and  often  before  the  crop  is  planted. 
In  order  to  make  the  risk  secure,  the  Southern  storekeeper 
generally  charges  an  average  of  twenty-five  per  cent  more 
for  the  goods  sold  than  the  charge  for  similar  supplies 
when  bought  for  cash.  The  supplies  are  usually  of  com- 
paratively low  grade.  The  farmer  therefore  pays  an 
equivalent  of  this  abnormal  rate  of  interest  on  his  credit. 
To  protect  himself  still  further,  the  storekeeper  in  the 
cotton  states  may  have  to  direct  the  farming  operations 
of  those  to  whom  he  extends  credit,  dictating  the  crops 
to  be  grown,  the  crop  rotations,  and  the  tillage  systems. 
When  an  able  man  handles  this  system  of  credit,  the 
agriculture  of  a  community  may  be  built  up  to  a  high 
state  of  productiveness,  but,  taken  as  a  whole,  the  system 
is  open  to  the  gravest  abuses.  The  farmer  sells  his  prod- 
ucts at  the  lowest  wholesale  price  and  buys  his  supplies 
at  the  highest  retail  prices.  It  has  proven  detrimental 
to  the  best  interests  of  an  agricultural  community,  to  the 
social  and  economic  advancement  of  the  farmers,  and 
equally   detrimental   to   those   who   furnish   the   credit. 


282  Cooperation  in  Agriculture 

The  average  farmer  who  depends  on  store  credit  would 
save  money  if  he  would  borrow  at  a  bank  on  such  security 
as  he  could  offer  and  pay  cash  for  the  supplies  which  he 
purchases. 

Bank  Credit 
Bank  credit  has  been  extended  less  to  agriculture  than 
to  almost  any  other  class  of  business,  because  land  is  not 
available  as  security  for  short-term  loans.  Yet  it  is  the 
most  common  form  of  credit  in  American  agriculture, 
probably  more  than  half  the  credit  of  the  American 
farmer  being  obtained  from  this  source.  Under  the 
national  bank  law,  which  has  not  been  revised  for  fifty 
years,  money  cannot  be  loaned  on  farm  lands  as  security. 
The  theory  of  the  law  is  that  a  mortgage  on  real  estate 
cannot  be  quickly  Uquidated  to  protect  the  bank  in 
case  of  an  emergency,  while  personal  securities  of  different 
kinds  which  the  bank  is  permitted  to  accept  can  be  quickly 
converted  into  money, — a  protection  that  was  considered 
necessary  when  the  banking  system  was  enacted,  because 
the  obligations  of  the  bank  are  largely  payable  on  demand. 
The  resources  of  the  national  banks  must  be  kept  in  a 
fluid  condition,  and  their  funds  can  only  be  invested  in 
short-term,  commercial  paper.  The  need  of  a  more 
elastic  rural  credit  system  is  recognized  by  the  monetary 
commission  appointed  by  President  Taft  to  revise  the 
national  banking  system,  and  an  amendment  to  the  na- 
tional bank  act  has  been  recommended  providing  that 
thirty  per  cent  of  time  deposits  may  be  loaned  upon  im- 
proved and  unencumbered  real  estate,  the  loans  not  to 
exceed  fifty  per  cent  of  the  value  of  the  property  which 
shall  be  situated  in  the  territory  near  the  bank. 


Rural  Credit  283 

In  case  of  the  loan  and  trust  companies  which  often 
act  as  brokerage  agents  in  placing  and  handling  loans,  in- 
surance companies,  savings  banks,  and  other  similar  cor- 
porations, the  investments  are  of  a  more  permanent  char- 
acter, and  these  institutions  accept  farm  mortgages  as 
security  for  long-time  credit  at  reasonable  rates  of  interest. 
They  do  not  often  extend  credit  for  short  periods  of  time. 
The  state  banks  and  private  banks  desire  to  turn  over 
their  capital  rapidly  and  do  not  as  a  rule  loan  money  on 
long-time  mortgages  on  farm  lands  and  do  not  accept 
land  as  secm-ity  for  short-term  loans.  These  institutions 
do  loan  money  on  proper  security  such  as  notes  or  stock 
certificates,  chattel  mortgages,  and  other  personal  security, 
for  short-time  loans. 


THE  NEED  OF  A   BETTER  RURAL  CREDIT   SYSTEM 

There  is  less  need  of  a  distinctive  rural  credit  system  in 
the  United  States  than  there  was  when  cooperative  credit 
systems  originated  in  Europe.  While  there  are  many 
abuses  in  handling  credit  available  to  farmers,  and  the  rate 
of  interest  may  be  high  when  compared  with  loans  extended 
in  commercial  business,  the  local  and  state  banks  that  have 
been  organized  in  nearly  every  town  of  several  hundred 
inhabitants,  especially  in  the  northern  and  western  parts 
of  the  United  States,  furnish  credit  to  the  farmers  on  per- 
sonal notes,  chattel  mortgages,  mortgages  on  realty,  or 
other  acceptable  security.  In  the  country  these  banks 
are  often  owned  and  managed  by  farmers  and  are  organized 
and  operated  primarily  for  rural  credit  purposes.  There 
is  great  competition  among  these  local  banks,  and  every 


284  Cooperation  in  Agriculture 

town  of  a  few  thousand  inhabitants  may  have  several 
banking  institutions  that  are  successfully  operated  and 
that  furnish  credit  to  the  farmers  at  reasonable  rates  of 
interest.  Through  these  local  and  state  banks,  a  respon- 
sible farmer  who  desires  credit  has  little  difficulty  in  se- 
curing a  short-term  loan  provided  he  can  offer  acceptable 
security,  and  his  land  is  available  for  security  for  long- 
term  loans.  The  small  farmer  and  especially  the  tenant 
farmer  whose  only  security  is  his  crops  or  cattle  or  other 
personal  property,  the  whole  amount  of  which  may  not  be 
available  to  hypothecate  as  security  for  a  short-term  loan, 
may  have  more  difficulty  in  securing  credit  from  a  bank  and 
is  forced  to  depend  on  the  store  as  his  principal  source  of 
credit.  One  of  the  fundamental  difficulties  in  rm-al  credit 
is  the  inelastic  nature  of  the  country  banking  system  which 
restricts  the  credit  that  a  rural  bank  can  extend,  and  the 
further  fact  that  the  best  security  in  the  world,  the  land 
on  which  he  grows  his  crops,  is  not  liquid  as  security. 
The  security  of  the  farmer  as  well  as  the  credit  of  the  bank 
is  therefore  restricted.  The  average  farmer  is  obliged 
to  sell  his  crops  at  the  prevailing  market  prices  at  the 
harvest  time.  He  cannot  hold  them  for  better  market 
conditions,  because  he  has  usually  secured  credit  for  a 
short  period  on  the  expectation  of  repaying  it  when  the 
crop  is  harvested. 

■  The  agricultural  credit  needs  have  been  met  in  foreign 
coimtries  by  the  organization  of  cooperative  credit  banks 
or  societies  on  the  principle  that  where  a  group  of  persons 
combine  to  furnish  a  collective  guarantee,  they  can  utilize 
the  security  of  that  guarantee  as  a  basis  for  obtaining 
credit  at  a  low  rate  of  interest.     This  collective  guarantee 


Rural  Credit  285 

may  be  in  the  form  of  a  mortgage  on  the  lands  of  the 
members  of  the  banking  society  as  in  the  Landschaften ; 
or  it  may  be  a  collective  personal  guarantee  given  by  the 
members  of  a  bank  to  repay  the  loans  extended  to  the 
members.  In  the  case  of  the  Raiffeisen  rural  banks,  un- 
limited liability  is  a  fundamental  part  of  the  system ;  in 
the  Schulze-Delitzsch  system,  the  liability  of  the  members 
may  be  either  limited  or  unlimited.  In  the  rural  credit 
systems  of  this  type  the  collective  personal  guarantee  as 
pointed  out  by  Dr.  Lorenzoni  is  in  fact  indirectly  a 
property  security. 

Based  on  these  collective  guarantees,  capital  is  secured 
for  the  members  in  a  variety  of  ways.  In  all  cases  it  is 
readily  secured  from  the  large  banking  institutions  at 
low  rates  of  interest.  In  France  the  government  furnishes 
the  main  source  of  capital  for  the  cooperative  banks.  In 
Germany  the  Landschaften  issue  bonds  and  secure  their 
capital  from  the  investing  public;  the  Raiffeisen  banks 
depend  on  their  current  deposits,  savings  deposits  and 
reserve  funds,  and  on  the  loans  which  they  obtain  from 
the  central  and  other  banking  institutions. 

The  following  are  the  principal  safeguards  for  loans 
given  on  personal  security  in  addition  to  the  loans  secured 
on  mortgages  as  outlined  by  Dr.  Lorenzoni  to  whom  the 
author  is  indebted  for  a  large  part  of  the  data  included  in 
the  rural  credit  discussion.^ 

"  (1)  That  loans  are  only  made  to  members  of  the  group 
and  that  only  persons  known  to  be  trustworthy  are  ad- 
mitted ; 

"(2)  That  membership  is  confined  to  persons  residing 

^  "  An  Outline  of  the  European  Credit  Systems." 


286  Cooperation  in  Agriculture 

within  a  small  district  and  that,  therefore,  the  members 
are  personally  known  to  one  another ; 

"(3)  That  the  members  being  mutually  responsible, 
it  will  be  to  the  interest  of  all  members  to  keep  an  eye  upon 
a  borrower  and  to  see  that  he  makes  a  proper  use  of  the 
money  lent  to  him ; 

"  (4)  That,  in  like  manner,  it  is  to  the  interest  of  all 
members  to  help  a  member  when  he  is  in  diflSculty ; 

"(5)  That  the  borrower  is  required  to  find  sureties  or 
give  other  collateral  security  for  the  repayment  of  the 
loan; 

"  (6)  That  the  borrower  binds  himself  to  apply  his  loan 
to  a  specific  purpose  which  will  bring  in  a  monetary  return 
sufficient  to  enable  him  to  repay  the  same  when  borrowed, 
to  pay  the  interest  charges,  and  to  leave  a  profit  to  him- 
self." 

A  brief  discussion  of  the  leading  foreign  cooperative 
credit  systems  may  be  helpful  in  the  consideration  of 
cooperative  credit  as  a  means  of  meeting  the  needs  of 
the  American  farmer,  but  as  the  question  is  receiving  con- 
sideration from  various  official  and  imofficial  sources,  no 
attempt  will  be  made  to  apply  the  foreign  methods  to 
American  conditions  or  to  suggest  the  steps  that  may 
be  taken  to  make  the  American  financial  system  better 
adapted  to  our  rural  credit  needs. 

THE   RAIFFEISEN   BANKS 

The  Raiffeisen  banking  system  is  designed  to  meet  the 
credit  needs  of  the  small  European  farmer.  The  system 
is  foimded  on  a  code  of  moral  and  educational  principles 
to  which  are  added  the  unlimited  Uability  of  members, 


Rural  Credit  287 

gratuitous  management,  and  operation  for  the  members 
at  cost,  and  a  restricted  area  where  the  members  know 
each  other  intimately. 

Organization  and  Management 
A  number  of  farmers  in  a  community  join  and  form  a 
cooperative  bank  in  which  the  members  are  jointly  liable 
for  the  debts  of  the  association,  and  each  member  is  liable 
for  his  neighbor  as  well  as  for  himself.  Each  member 
owns  a  limited  number  of  shares  of  stock,  usually  only 
one.  The  average  amount  of  paid-up  capital  of  each  mem- 
ber in  Germany  in  1909  was  less  than  five  dollars.  The 
interest  paid  on  the  stock  is  the  same  as  the  interest  paid 
by  members  on  loans.  Each  member  has  one  vote  in 
determining  the  policies  of  the  association.  The  profits 
from  the  banking  operations  are  carried  in  the  reserve 
and  are  prorated  to  the  members.  The  management  of 
the  bank  is  in  the  hands  of  the  entire  membership  which 
acts  in  a  body  known  as  the  General  Meeting.  The  Gen- 
eral Meeting  intrusts  the  management  to  a  supervisory 
council  and  to  an  executive  committee  or  committee  of 
management,  and  to  a  treasurer,  all  of  which  are  appointed 
by  the  General  Meeting,  the  treasurer  usually  being  the 
only  paid  employee  of  the  bank. 

The  Working  Capital 

The  working  capital  that  the  Raiffeisen  bank  uses  to 
loan  to  its  members  is  derived  from  the  paid-in  capital 
of  the  members,  the  reserve  that  has  been  accumulated 
in  the  past,  the  current  deposits  and  deposits  in  the  sav- 
ings department,  and  the  money  which  is  borrowed  from 


288  Cooperation  in  Agriculture 

individuals,  from  the  central  cooperative  banks,  or  from 
other  banking  institutions.  The  working  capital  of  the 
fifteen  thousand  Raiffeisen  banks  in  Germany  in  1909 
was  $461,089,632,  one  and  two-tenths  per  cent  of  which 
was  share  capital,  two  and  six-tenths  per  cent  reserve, 
nine  and  eight-tenths  per  cent  current  deposits,  seventy- 
five  and  two-tenths  per  cent  savings  deposits  and  eleven 
and  two-tenths  per  cent  other  liabilities.  The  capital 
of  the  bank  itself,  that  is,  the  share  capital  and  the  re- 
serve, forms  three  and  eight-tenths  per  cent  of  the  total 
volume  of  capital  in  use,  and  eighty-five  per  cent  of  the 
capital  is  furnished  by  the  current  and  savings  accounts 
of  the  members.  Under  the  Raiffeisen  plan  less  than  four 
per  cent  of  the  total  volume  of  business  transacted  in 
Germany  in  1909  was  represented  by  the  paid-in  capital 
of  the  bank,  i.e.  the  reserve  and  paid-in  capital  stock. 
It  is  pointed  out  by  Dr.  Lorenzoni  that  of  the  two  billion 
marks  loaned  to  the  farmers  in  1909,  eighty-eight  and 
eight-tenths  per  cent  was  provided  by  the  savings  and 
deposits  of  the  farmers  themselves,  or  deposits  made 
through  local  pride.  It  will  be  seen  from  these  data  that 
an  enormous  business  is  transacted  by  the  Raiffeisen 
banks  on  a  very  small  capital. 

The  Loaning  of  Money 

The  money  loaned  to  the  members  of  the  Raiffeisen 
banks  are  both  short-term  and  long-term  loans.  About 
one-third  of  the  loans  are  of  the  short-term  variety  and 
are  principally  for  current  expenses.  The  member  se- 
cures his  loan  by  the  indorsement  of  the  notes  by  other 
members,  the  deposit  of  stock  certificates,  valuables,  or 


Rural  Credit  289 

other  acceptable  forms  of  security,  by  mortgage  on  the 
land,  or  in  some  cases  by  an  unsecured  personal  note. 
The  greatest  security,  however,  lies  in  the  collective  in- 
terest of  the  members  in  the  banking  system,  the  interest 
of  every  member  in  the  financial  affairs  of  his  neighbor,  and 
of  the  great  financial  strength  that  comes  to  an  institution 
that  is  founded  on  a  mutually  cooperative  rural  banking 
system  in  which  the  character  of  every  member  and  the 
purpose  of  his  loans  is  known  and  passed  upon  by  every 
other  member. 

The  Federation  of  the  Raiffeisen  Banks 

There  are  two  kinds  of  federations  in  Germany  with 
which  the  Raiffeisen  banks  are  identified.  The  coopera- 
tive societies  of  different  kinds  formed  in  a  province  on 
the  Raiffeisen  plan  usually  join  and  organize  a  provincial 
federation,  and  these  in  turn  are  federated  into  the  Na- 
tional Federation  of  Darmstadt,  Germany.  The  object 
of  these  federations  is  to  look  after  the  general  questions 
that  affect  all  of  the  associations  alike,  to  protect  their 
mutual  interests,  and  to  develop  the  cooperative  move- 
ment among  the  rural  classes  by  propaganda  and  educa- 
tion. In  1910  the  National  Federation  in  Germany 
was  composed  of  forty-one  provincial  federations,  and 
they  in  turn  included,  on  June  1,  18,962  cooperative  so- 
cieties of  which  12,894  were  cooperative  credit  asso- 
ciations. 

In  addition  to  the  federations  mentioned  in  the  preced- 
ing paragraph,  the  banks  of  a  province  are  federated  into 
a  central  bank  for  strictly  banking  purposes,  and  the 
provincial  banks  are  again  federated  into  two  national 


290  Cooperation  in  Agriculture 

central  banks.  These  banking  federations  and  the  fed- 
erations for  propaganda,  protection,  and  education  are 
closely  affiliated  and  are  members  of  each  other's  organ- 
izations, the  officers  of  the  one  frequently  managing  the 
affairs  of  both.  The  function  of  the  provincial  banks  and 
of  the  central  banks  is  to  furnish  capital  to  the  local  banks 
and  other  cooperative  societies  within  the  federations  and 
to  the  provincial  banks  on  the  same  principle  that  the 
local  bank  furnishes  capital  to  its  members.  It  is  the 
means  of  making  the  cooperative  rural  banking  system 
provincial  and  national  in  scope. 

THE   SCHULZE-DELITZSCH  BANKS 

The  Schulze-Delitzsch  banks  are  formed  to  meet  the 
commercial  and  industrial  needs  of  the  towns  and  cities,  but 
they  are  utilized  to  a  large  extent  by  the  better  class  of 
farmers  who  are  also  members  of  the  banks.  Their  busi- 
ness is  conducted  more  like  modern  banking  institutions. 
They  have  a  large  capital,  pay  good  dividends,  and  have 
either  limited  or  unlimited  liability.  Most  of  the  Schulze- 
Delitzsch  banks  are  affiliated  into  provincial  federations. 
There  were  939  of  the  Schulze-Delitzsch  banks  in  Germany 
in  1910  with  a  membership  of  600,000  and  loans  amount- 
ing to  4,015,900,000  marks.  The  average  membership 
of  the  Schulze-Delitzsch  banks  in  1910  was  639,  of  the 
Raififeisen  banks  92,  while  the  total  membership  of 
the  latter  banks  was  1,163,186.  The  membership  of  the 
Schulze-Delitzsch  banks  is  made  up  of  farmers  who  cul- 
tivate medium-sized  places,  wage  earners,  professional 
men,  artisans,  merchants,  and  others,  the  farmers  forming 
the  largest  single  class.    About  60  per  cent  of  the  Schulze- 


Rural  Credit  291 

Delitzsch  banks  are  founded  on  the  unlimited  liability 
plan,  this  form  being  considered  safest  in  sections  that  are 
not  familiar  with  cooperative  credit.  The  average  share 
capital  per  member  in  1910  was  360  marks  as  compared 
with  an  average  of  19  marks  in  the  Raiffeisen  system. 

The  Working  Capital 

The  working  capital  of  the  Schulze-Delitzsch  banks  in 
1910  in  Germany  was  $346,743,897,  14.8  per  cent  of  which 
was  share  capital,  6.5  per  cent  reserve,  and  78.7  per  cent 
capital  from  outside  sources.  The  proportion  of  the  bank's 
own  funds  in  1910  was  21.3  per  cent  in  the  Schulze- 
Delitzsch  and  3.8  per  cent  in  the  Raiffeisen  banks.  The 
principal  function  of  these  banks  is  to  furnish  short-time 
credit,  41.5  per  cent  of  the  loans  being-  of  this  nature, 
while  only  10  per  cent  were  on  mortgages.  The  Schulze- 
Delitzsch  banks  are  federated  into  thirty-two  provincial 
federations  which  include  also  cooperative  societies  of 
other  kinds.  These  provincial  federations  are  affiliated 
with  the  General  Federation  of  German  Cooperative 
Societies.  They  have  not  federated  into  a  central  na- 
tional banking  institution  as  the  Raiffeisen  banks  have, 
though  the  movement  of  these  funds  and  the  equalization 
of  their  debits  and  credits  are  facilitated  by  the  Dresden 
bank,  a  private  institution. 

THE   LANDSCHAFTEN 

The  Landschaften  are  cooperative  banking  institutions 
in  Germany  formed  collectively  by  the  proprietors  or 
landlords  of  a  province  or  other  administrative  unit  to 
obtain  for  their  members  the  credit  they  desire  in  making 


292  Cooperation  in  Agriculture 

permanent  improvements  on  the  land.  They  are  long- 
term  land  credit  banks.  The  credit  is  obtained  on  the 
security  of  a  collective  mortgage  on  their  lands  which  is 
syndicated  into  a  bond.  The  secmity  also  includes  the 
assets  of  the  associations  and  ultimately  the  unUmited 
liabiUty  of  all  its  members.  These  bonds  are  sold  to  the 
investing  public,  and  the  funds  derived  are  used  in  making 
loans  to  the  members.  There  are  twenty-five  of  the  co- 
operative land  banks  in  Germany,  the  first  having  been 
formed  at  the  end  of  the  eighteenth  century.  The  total 
amount  of  bonds  issued  by  the  Landschaften  in  1909 
equaled  S653,294,429. 

The  Landschaften  are  managed  by  an  assembly  of 
land-owners  and  an  executive  committee.  Those  of  the 
Committee  having  legal  knowledge  may  receive  pay  for 
their  services ;  the  others  receive  traveling  and  incidental 
expenses  only.  The  business  of  the  Landschaften  is 
inspected  by  the  government,  and  the  employees  are 
indirect  employees  of  the  states. 

In  granting  loans,  a  proprietor  makes  a  request  for  the 
loan,  giving  a  detailed  statement  of  the  object.  The 
funds  for  the  loan  are  secured  by  the  sale  of  the  bonds 
issued  by  the  Landschaften,  and  the  amount  loaned  a 
member  may  equal  from  one-half  to  two-thirds  the  value 
of  his  land.  The  estates  of  the  land-owners  who  are  mem- 
bers of  the  Landschaften  taken  collectively  form  the 
security  for  the  bondholder. 

Concerning  the  Landschaften,  Ambassador  Herrick 
states:^   "Originally  a   Landschaft  did  not  give  cash  to 

» Preliminary  Report  on  Land  and  Agricultural  Credit  in  Europe. 
Division  of  Information.    Department  of  State,  October,  10,  1912. 


Rural  Credit  293 

a  member  in  exchange  for  his  mortgage.  It  gave  him  a 
bond  which  simply  contained  a  promise  to  pay  in  the 
event  the  interest  and  principal  could  not  be  collected 
from  the  debtor.  The  bond  was  of  the  exact  size  of  the 
mortgage,  primarily  secured  by  it,  and  made  payable  to 
bearer  on  a  few  months'  notice.  In  case  of  default  the 
holder  had  to  resort  to  foreclosure  proceedings,  so  the 
bonds  had  only  a  limited  circulation,  and  were  often  sold 
below  par.  This  was  but  a  slight  advance  on  private 
money  lending.  Later  the  associations  undertook  to 
collect  the  interest  and  principal.  Finally  they  assumed 
direct  responsibility,  and  began  to  give  cash  to  members 
for  their  mortgages,  raising  funds  for  this  purpose  by  issu- 
ing and  selling  bonds  of  even  denominations  for  large  and 
small  amounts.  The  practice  of  requiring  mortgages  to 
be  paid  in  lump  was  abolished,  and  in  place  thereof  the 
loans  were  made  repayable  by  annual  installments  run- 
ning through  a  long  period  of  years,  and  the  installments 
were  set  aside  for  redeeming  the  bonds.  These  steps 
brought  about  a  complete  revolution  in  land  credit,  and 
marked  the  beginning  of  the  land-mortgage  business  as 
it  is  known  to-day.  The  whole  theory  of  the  organization 
of  land  credit  is  based  upon  this  debenture  bond  and  sys- 
tem of  amortization  and  sinking  funds  devised  and  intro- 
duced by  the  Landschaften.  One  without  the  other  two 
is  useless.  The  three  must  be  combined,  and  also  coupled 
with  strong  management  under  wise  laws  in  order  to 
attract  a  steady  flow  of  cheap  money  to  agriculture.  It 
is  remarkable  that  this  truth  has  never  been  realized  or 
applied  to  the  United  States  for  farm-mortgage  loans.  In 
spite  of  the  example  of  practically  every  nation  in  Europe 


294  Cooperation  in  Agriculture 

for  generations,  the  lending  of  money  on  mortgage  in 
America  still  remains  largely  a  mere  brokerage  business, 
unrestricted  by  proper  governing  laws,  either  by  indi- 
viduals or  corporations,  while  mortgages  continue  to  be 
drawn  up  for  three  or  five  years,  when  experience  shows 
that  the  average  life  of  a  loan  is  far  in  excess  of  that 
period  and  needs  to  be  renewed  time  and  again,  with 
added  expense  to  the  debtor  and  trouble  for  the  creditor. 
Had  the  European  amortization  system  been  employed,  the 
companies  dealing  in  western  farm  mortgages  between 
1890  and  1894  probably  would  have  escaped  the  misfor- 
tunes that  brought  them  down  to  ruin. 

"Amortization  is  simply  a  method^of  paying  off  a  loan 
by  returning  a  little  of  the  capital  each  year.  These 
pajnnents  are  called  annuities,  and  are  composed  of  the 
interest  and  contributions  to  the  sinking  fund  and  the 
cost  of  conducting  business.  They  are  calculated  for 
periods  of  10  to  75  years,  and  at  the  end  of  the  period  the 
mortgaged  debt  becomes  extinguished,  and  the  property 
returns  to  the  owner  free  and  clear  of  all  encumbrances." 

The  New  Landschaften 

"These  new  institutions  are  of  different  patterns. 
Several  are  annexes  to  the  older  societies,  but  most  are 
independent  and  resemble  ordinary  mortgage  banks, 
except  in  the  essential  point  that  they  have  no  share 
capital  earning  dividends.  They  are,  as  the  old  so- 
cieties, simply  syndicates  of  borrowers  formed  to  supply 
proprietors  with  capital  on  the  lowest  possible  terms  and 
repayable  in  the  easiest  manner.  They  are  gratuitous 
intermediaries  between  the  outside  capitalists  and  the 


Rural  Credit  295 

borrowers,  and  while  performing  services  of  the  highest 
importance  in  testing  the  security  offered  by  the  borrowers, 
and  in  guaranteeing  to  the  public  the  safety  of  the  capital 
lent  by  them,  they  charge  absolutely  nothing  for  their 
services  beyond  a  small  commission,  perhaps  one-fourth 
of  1  per  cent  or  even  one-tenth  of  1  per  cent,  to  cover 
actual  expenses.  It  is  usual  for  each  association  to  be 
restricted  to  a  particular  area  of  operations  within  which 
every  proprietor,  whether  noble  or  peasant,  may  obtain 
a  loan  if  he  can  offer  sufficient  security.  There  is  always 
a  minimum  limit  either  to  loans  or  to  the  value  of  prop- 
erty on  which  loans  will  be  given.  This  is  usually  low. 
In  the  new  Bradenburg  Landschaft,  affiliated  to  the  old 
Kur-und-Nemnark  Landschaft,  loans  may  be  granted  on 
property  having  a  net  income  of  only  $25.  The  minimum 
limit  is  seldom  even  approached. 

"Members  are  those  who  borrow  from  the  bank.  They 
are  generally  responsible  in  all  their  property,  not  merely 
for  their  own  borrowings,  but  for  the  debts  of  the  society 
to  the  outside  public.  But  in  some  cases  only  the  prop- 
erty pledged  to  the  society  is  responsible;  in  others 
they  are  bound,  in  case  of  need,  to  pay  a  sum  proportion- 
ate to  the  amount  of  their  own  borrowing.  There  are 
no  shares  to  be  paid  up  except  in  two  societies.  These 
two  resemble  cooperative  societies,  for  the  shares  are 
personal  and  nontransferable,  are  of  unlimited  number, 
varying  with  the  number  of  members,  and  their  value  is 
claimable  by  a  withdrawing  member.  The  share  seems 
to  be  demanded  simply  to  provide  a  first  working  capital 
and  the  nucleus  of  a  reserve.  The  amount  of  the  share  is 
frequently  a  certain  percentage  of  the  amount  of  the  loan 


296  Cooperation  in  Agriculture 

required.  Some  societies  demand  an  entrance  fee  of  a 
few  cents,  which  goes  to  the  reserve.  This  reserve  will 
be  dealt  with  below. 

"The  societies  in  general,  having  no  share  capital,  do 
not  lend  their  own  funds.  The  candidate  for  a  loan  asks 
that  debentures  may  be  issued  against  a  mortgage  of  his 
property.  This  is  then  examined.  If  the  security  is 
approved,  the  candidate  executes  a  mortgage  deed  to  the 
society,  which  thereupon  issues  debentures  which  are 
placed  on  the  market  and,  being  sold,  provide  the  funds 
for  the  loan.  In  the  old  banks  the  debentures  are  simply 
handed  to  the  borrower,  who  sells  them  for  himself.  In 
the  new  land  banks  either  this  is  done,  or  the  bank  sells 
them  and  pays  the  borrower  the  value  if  below  par,  or  if 
they  sell  above  par,  then  the  face  value,  the  surplus  going 
to  the  reserve;  or  they  simply  issue  debentures  on  the 
market  and  pay  the  borrower  the  amount  of  the  loan  as 
settled.  It  will  be  seen,  then,  that  the  banks  have  no 
capital  and  no  need  for  it. 

"The  debentures  are  for  the  usual  class,  secured  not  by 
the  particular  mortgage  on  which  they  are  issued,  but  by 
the  whole  mass  of  mortgages  held  by  the  bank  and  by  all 
its  proper  forms  of  security,  viz.,  the  property  of  the  mem- 
bers, the  reserve  or  guaranty  fund,  and  even  the  sinking 
fimds.  In  some  banks  a  debenture  holder  has  the  right 
(never  needed,  however)  of  requiring  a  court  to  assign  a 
particular  mortgage  against  his  debenture  as  a  specific 
security  in  case  the  bank  should  fail  to  pay  him  his  interest 
or  capital  due.  A  debenture  holder  cannot  demand  pay- 
ment of  his  debenture,  except  when  it  is  drawn  for  pay- 
ment.    But  the  bank  can  call  in  any  at  six  months' 


Rural  Credit  297 

notice,  besides  withdrawing  them  by  lot  in  the  usual  way. 
These  debentures  enjoy  an  excellent  position,  the  4  per 
cents  selling  usually  at  or  above  par.  Since  cheapness  of 
loans  is  the  sole  object  of  the  bank,  it  is  customary  to 
call  in  debentures  selling  at  a  premium  and  issue  a  fresh 
series  at  a  lower  rate. 

"Loans  are  usually  applied  for  to  the  district  com- 
mittee which  each  bank  has,  with  a  statement  of  the 
property,  the  amount  required,  and  all  documents  neces- 
sary to  prove  title  and  freedom  from  encumbrance. 
Properties  may  be  valued  by  a  special  valuation ;  or  a  mul- 
tiple of  the  net  income,  as  assessed  to  the  land  tax,  may 
be  taken.  In  both  cases,  however,  an  inspection  of  the 
property  is  necessary  unless  under  a  special  rule.  Half 
to  two-thirds  of  the  estimated  value  is  allowable  as  a 
loan.  The  interest  paid  by  the  borrower  on  the  loans  is 
that  paid  by  the  bank  on  the  debentures,  the  bank  being 
merely  an  intermediary  between  the  borrower  and  the 
actual  lending  public.  But  where  the  bank  pays  the 
loan  in  cash  it  charges  such  interest  as  it  thinks  proper, 
in  order  to  make  up  any  loss  should  the  debentures  sell 
below  par.  Loans  are  repayable  almost  entirely  by 
amortization,  usually  in  about  53  years.  Some  short- 
term  loans  are  granted  with  corresponding  debentures. 
The  bank  cannot  demand  repayment  of  a  loan  except 
in  case  of  waste,  deterioration,  or  the  like.  On  the  other 
hand,  the  borrower  is  at  liberty  to  repay  in  whole  or  in 
part  whenever  he  pleases,  but  must  pay  the  entire  interest 
for  the  half  year  in  which  he  repays.  The  loan  is  repaid 
by  an  annuity  consisting  of  the  interest,  sinking  fund 
(usually  beginning  at  one-half  of  1  per  cent),  with  a 


208  Cooperation  in  Agriculture 

contribution  to  the  reserve  or  guaranty  fund,  and  another 
for  the  expenses  of  administration.  The  annuities  have 
totaled  6  per  cent,  but  they  now  average  around  4  per 
cent  or  lower  —  e.g.  interest  being  3  per  cent,  sinking  fund 
one-half  of  1  per  cent,  guaranty  fund  one-fourth  of  1  per 
cent,  and  expenses  one-fourth  of  1  per  cent.  Some  of  the 
banks  also  require  a  lump  payment  on  the  grant  of  the 
loan  of  1  or  2  per  cent  to  be  credited  either  to  the  working 
or  to  the  guaranty  fund.  The  working  fund  is  formed  by 
the  contribution  made  for  the  expenses  of  management 
and  any  special  sources." 


CHAPTER  XII 

THE  RURAL  TELEPHONE 

The  development  of  the  rural  telephone  service  during 
the  last  generation  has  been  a  leading  factor  in  the  ameli- 
oration of  country  life  conditions.  According  to  data 
compiled  by  the  Bureau  of  the  Census  ^  there  were  17,902 
farmers'  telephone  lines  in  the  United  States  in  1907, 
including  565,649  telephones ;  the  largest  development  of 
lines  occurred  in  Iowa,  Missouri,  Illinois,  Kansas,  Indiana, 
and  Ohio.  At  the  same  time  there  were  three  hundred 
and  sixty-eight  mutual  or  cooperative  systems  which  are 
organized  principally  in  the  rural  districts  operated  by  the 
commercial  companies. 

A  farmers'  telephone  system  as  understood  by  the 
Census  Bureau  is  one  that  has  no  regular  exchange  or 
central  of  its  own,  but  which  may  or  may  not  be  connected 
with  the  exchange  of  a  Bell  or  of  a  commercial  or  mutual 
system.  These  lines  are  not  incorporated.  A  mutual  or 
cooperative  system  is  operated  primarily  for  the  conven- 
ience of  its  members,  and  not  for  profit.  The  members 
are  assessed  to  pay  expenses  of  operation,  maintenance, 
and  extension.  Many  of  these  cooperative  associations 
are  incorporated.  The  commercial  systems  are  operated 
primarily  for  profit  and  comprise  the  Bell  system  and 
independent  commercial  companies. 

1  "  Telephones,"  1907. 
299 


300  Cooperation  in  Agriculture 

The  rural  telephone  service  dates  back  thirty-three 
years  ago  when  the  Bell  Company,  which  then  controlled 
the  patents,  leased  telephones  to  be  used  between  the 
residences  of  a  community.  They  were  not  exchange 
telephones,  and  under  this  system. the  farmers  of  a  com- 
munity could  enjoy  a  telephone  service,  though  they  were 
not  connected  with  any  other  line.  The  next  step  oc- 
curred in  the  early  eighties,  when  these  independent  circuits 
were  connected  through  an  exchange.  After  1893,  when 
the  principal  patents  on  the  telephones  expired,  the 
farmers  began  to  organize  their  own  lines,  the  movement 
being  aided  by  the  Bell  and  other  commercial  companies 
in  order  to  develop  a  large  rural  service  that  would  even- 
tually be  connected  with  the  great  trunk  systems  of  the 
Bell  Company.  The  evolution  of  the  rural  telephone 
system  is  thus  related  by  the  Bureau  of  the  Census.  — 

"In  those  communities  where  the  farmers  have  built 
their  own  telephone  lines,  the  original  form  of  organization 
has  been  purely  mutual.  Construction  has  been  a  co- 
operative work,  and  the  association  of  the  farmers  the  most 
primitive  type  of  corporation.  The  establishment  and 
development  of  such  farmers'  telephone  systems  have 
usually  gone  on  along  evolutionary  lines,  and  have  followed 
more  or  less  closely  the  form  herewith  outlined.  A  group 
of  farmers  who  lived  within  a  reasonable  distance  of  one 
another,  having  come  to  the  conclusion  that  telephone 
service  was  an  essential  comfort  of  life,  and  that  it  had 
already  passed  from  the  region  of  luxuries  into  the  field  of 
necessities,  would  meet  together  and  arrange  to  establish 
a  telephone  system  which  should  connect  them  with  one 
another.     The  work  involved  in  constructing  such  system 


PLATE  XVI.  — Farmers'  Cooperative  Grain  Elevators.     Chapter  VII. 


r     m 

a 

^.^%mmitr^^^^&4^K^m 

^B^^H  r-Bs|p       ^'  ^'^^^^^9 

1 

The  Rural  Telephone  301 

would  be  so  divided  that  each  member  of  the  association 
would  contribute  an  equivalent  part  of  the  material  and 
labor.  If  the  country  was  wooded,  the  farmers  making 
up  the  association  agreed  to  cut  and  supply  the  poles  and 
to  haul  them  to  the  places  where  they  were  needed.  In 
many  cases  it  might  happen  that  one  member  of  the  group 
of  farmers  had  a  wood  lot  and  could  supply  all  the  poles, 
and  he  would  agree  to  furnish  a  sufficient  number  of  poles, 
while  the  other  members  of  the  association  would  take 
charg-^^  of  the  work  of  setting  them  and  stringing  the  wires. 
The  farmers'  boys  and  the  farm  hands  did  the  work  of 
setting  the  poles  and  putting  on  the  cross-arms,  which 
would  in  many  cases  be  hewn  out  of  native  timber.  The 
wire  and  the  insulators,  the  switchboard  and  the  instru- 
ments, would  have  to  be  bought,  and  so  a  cash  assessment 
would  be  levied  on  each  member  to  make  these  purchases. 
If  it  became  necessary  to  buy  poles  because  of  the  lack  of 
suitable  timber  in  the  district,  the  assessment  had  to  be 
proportionally  increased.  The  work  of  stringing  the  wires 
and  installing  the  instruments  was  taken  up  by  the  me- 
chanically-minded farmers  and  their  boys,  and  in  a  very 
short  time  a  complete  telephone  system  was  in  operation. 
The  switchboard  was  placed  in  the  house  of  one  of  the 
members  of  the  association  situated  at  some  convenient 
point,  and  the  operation  of  the  lines  was  attended  to  by 
the  wife  and  daughters  of  the  farmer  in  whose  home  the 
board  was  located. 

"A  strictly  mutual,  isolated  system  of  this  kind  sufficed 
for  a  while  to  give  all  the  telephone  service  this  particular 
group  desired,  but  it  was  not  long  before  progressive  farm- 
ers realized  the  need  of  cormection  with  the  outer  world. 


302  Cooperation  in  Agriculture 

Negotiations  would  therefore  be  opened  with  the  telephone 
company  operating  in  the  nearest  town,  the  town  with 
which  these  farmers  did  their  usual  trading,  for  a  contract 
by  which  the  farmers  could  secure  town  service  and  also 
get  access  to  the  toll  lines  reaching  to  the  county  seat  and 
the  metropohtan  center  of  the  district.  These  contracts 
between  the  groups  of  farmers  and  the  larger  systems 
operating  in  the  cities  and  connecting  with  the  long-dis- 
tance toll  lines  made  these  farmers'  groups  or  mutual 
companies,  as  many  of  them  were  called,  a  part  of  a  larger 
system  —  sometimes  the  Bell,  sometimes  the  independent 
—  and  marked  the  first  step  toward  attaining  the  ultimate 
end  of  telephone  service,  which  is  to  enable  every  one  who 
has  access  to  a  telephone  to  reach  every  other  person  who 
can  reach  one. 

"The  connection  with  the  more  important  systems  in  a 
way  furnished  all  the  telephone  service  needed  for  the 
second  period  of  development,  but  a  third  step  had  to 
follow.  In  many  cases,  as  these  little  mutual  farmers' 
lines  took  on  more  subscribers  and  extended  from  farm  to 
farm,  they  began  to  overlap  one  another  in  the  territory 
served,  a  fact  which  in  the  natural  sequence  of  events  led 
to  the  consolidation  of  these  lines  and  the  formation  of 
larger  systems.  As  a  result  of  this  process  of  consolida- 
tion the  purely  mutual  character  of  the  ownership  became 
weaker.  In  order  to  secure  a  proper  maintenance  of  the 
lines  and  those  uniform  methods  of  operation  and  construc- 
tion which  are  essential  to  good  service,  it  was  found  nec- 
essary for  their  ownership  to  take  the  corporate  form; 
and  to-day  a  very  large  number  of  incorporated  telephone 
companies  exist  in  the  United  States  controlled  by  a  regu- 


The  Rural  Telephone  303 

larly  elected  board  of  directors,  which  are  in  reality  nothing 
but  a  combination  of  small  groups  of  farmers  forced  by  the 
circumstances  to  take  the  form  of  a  corporation." 

"The  establishment  of  the  farmers'  lines  is,  of  course, 
inexpensive,  so  far  as  cash  expenditure  is  concerned.  The 
farmer  contributes  what  he  has  the  most  of,  that  is,  labor 
and  material,  and  is  called  upon  for  the  smallest  possible 
amount  of  what  he  finds  it  hardest  to  secure,  that  is,  cash. 
For  a  company  to  undertake  this  construction  would 
require  enormous  sums  of  money,  and  this  money  would 
represent  simply  the  conversion  of  one  form  of  wealth  into 
another  with  no  gain  in  the  total  wealth.  The  farmers 
build  these  lines  in  their  spare  time,  that  is,  in  the  time 
which  otherwise  would  not  add  anything  to  the  wealth 
of  the  community,  but  which  by  this  means  is  directly 
converted  into  permanent  wealth. 

"To  maintain  the  telephone  line  it  is  customary  for  the 
various  members  of  the  association  to  become  responsible 
either  for  that  portion  of  the  line  located  on  their  farms, 
or  for  some  other  definite  portion  of  the  system,  and  in- 
asmuch as  the  service  on  the  whole  line  depends  upon  the 
proper  maintenance  of  every  portion  of  the  line,  if  any 
one  of  the  members  neglects  to  keep  up  his  portion  he  soon 
finds  himself  in  disfavor  with  all  the  other  members  of  the 
group.  On  the  other  hand,  the  farmer  who  knows  that 
a  friend  is  responsible  for  the  quality  of  the  service  on  his 
telephone  line  is  far  more  lenient  toward  small  inter- 
ruptions in  the  service  or  faults  in  transmission  than  he  is 
under  similar  circumstances  when  the  service  is  furnished 
by  a  company.  When,  in  course  of  time,  it  becomes  nec- 
essary as  a  result  of  the  expansion  of  the  system  to  secure 


304  Cooperation  in  Agriculture 

the  services  of  some  one  who  shall  give  his  whole  time  to 
seeing  that  the  line  and  the  instruments  are  kept  in  proper 
repair,  farmers'  boys  are  found  growing  up  in  every  country 
community  who  take  an  interest  in  electrical  and  mechani- 
cal methods,  and  who  gladly  devote  themselves  to  this  work 
for  a  very  moderate  amount  of  cash  payment,  their  ambi- 
tion being  to  learn  the  methods  of  operating. 

"The  operating  expense  of  the  telephone  service  is 
likewise  small.  A  switchboard  placed  in  a  farmer's  house 
and  attended  by  the  farmer's  wife  and  daughters  makes  but 
little  demand  upon  the  time  of  any  one,  and  this  service  is 
given  for  a  minimum  cash  payment.  The  mere  fact  of 
having  the  switchboard,  the  center  of  the  farmers'  group, 
is  often  a  source  of  sufficient  pride  to  cause  this  work  to 
be  done  for  nothing. 

"Thus  it  happens  that  in  the  earlier  days  of  a  farmers' 
telephone  system,  when  the  plant  is  small  and  is  carefully 
looked  after  by  the  members  of  the  association,  the  cost 
of  the  service  is  very  trifling.  Later  on  the  plant  grows 
old  and  deteriorates  and  requires  more  repairs.  The  num- 
ber of  subscribers  increases,  and  the  operators  must  spend 
their  entire  time  at  the  switchboard.  Storms  come,  and 
the  partially  worn-out  plant  succumbs  more  readily  to  the 
weather.  The  result  is  that  at  the  end  of  the  year  the 
members  of  the  association  find  that  the  expenses  have 
been  greater  than  in  previous  years,  and  much  larger  than 
they  had  ever  figured  on.  This  produces  dissatisfaction, 
but  still  the  telephone  service  has  become  so  indispensable 
that  it  must  be  continued.  When  this  stage  has  been 
reached,  the  association  usually  feels  obliged  to  become  a 
regular  company  and  very  often  to  consolidate  with  its 


The  Rural  Telephone  305 

neighbors,  in  order  that  the  consolidated  company  may 
secure  a  technical  man  the  cost  of  whose  services  can  be 
apportioned  among  a  sufficiently  large  number  of  sub- 
scribers so  that  this  charge  will  but  slightly  increase  the 
burden  of  each. 

''Very  few  of  those  who  express  dissatisfaction  with  the 
increased  expense  of  the  telephone  service  which  results 
from  the  conditions  indicated,  stop  to  think  of  the  reasons 
for  this  increased  cost  of  service,  and  of  the  increased  value 
which  their  telephones  now  possess.  As  the  system  has 
grown,  the  investment  has  naturally  become  greater,  and 
inasmuch  as  the  newer  subscribers  are  located  at  points 
more  distant  from  the  center  of  the  group  than  were  the 
first,  the  investment  in  poles  and  wires  for  each  subscriber 
has  become  greater.  So,  too,  the  investment  in  the 
switchboard  becomes  greater  with  the  growth  of  the  sys- 
tem. A  small  switchboard  for  a  hundred  subscribers  can 
be  installed  for  about  $4  a  subscriber,  while  for  a  thousand 
subscribers  such  a  board  might  easily  cost  $20  for  each 
subscriber. 

"Similar  conditions  exist  with  regard  to  the  work  of 
operating  the  switchboard.  The  farmers  at  first  do  not 
consider  the  fact  that  where  there  were  20  subscribers, 
and  each  one  could  talk  to  but  19  others,  the  daily  number 
of  calls  from  each  subscriber  was  small.  When  the  num- 
ber increased  to  300,  each  subscriber  could  reach  299  others, 
so  that  the  demand  for  telephone  calls  became  greater. 
The  result  was  that  with  a  small  number  of  subscribers  the 
average  farmer  would  resort  to  the  telephone  three  times 
a  day.  When  he  could  reach  299  of  his  neighbors  he  might 
call  up  10  of  those  a  day.     This  increased  number  of  calls 


306  Cooperation  in  Agriculture 

would  mean,  of  course,  that  an  operator  could  attend  to 
fewer  lines  than  had  formerly  been  the  case.  With  20 
subscribers,  each  of  whom  gave  but  three  calls  a  day, 
there  would  be  but  60  calls,  so  that  the  operator  would 
have  a  great  deal  of  spare  time,  and  would  not  need  to 
stay  at  the  switchboard,  but  could  go  to  it  when  the  bell 
rang.  With  300  subscribers,  and  an  average  of  10  calls 
a  day  for  each  subscriber,  the  number  of  calls  daily  would 
be  3000.  If  these  calls  were  distributed  equally  over  the 
entire  day,  they  could  still  be  handled  by  one  girl  without 
difficulty  if  she  gave  her  entire  time,  but  telephone  calls, 
even  in  rural  districts,  are  not  so  distributed.  The  morn- 
ing is  apt  to  be  a  busy  time  on  the  farm  lines,  when  business 
is  being  transacted  with  the  adjoining  town,  plans  made 
with  neighbors,  and  orders  given  of  one  kind  and  another. 
A  practical  lull  then  ensues  during  the  major  part  of  the 
day,  followed  by  a  sudden  rush  of  business  about  supper 
time,  when  the  telephone  visiting  begins  and  the  members 
of  the  farm-line  telephone  associations  discuss  all  the 
events  of  the  day  and  happenings  past,  present,  and  to 
come,  and  make  appointments  for  business  and  for  pleas- 
ure. During  this  time  the  farmers'  telephone  board  is  a 
very  busy  place,  so  that  the  number  of  patrons  a  single 
operator  can  attend  to  is  smaller,  and  consequently  more 
operators  must  be  employed  to  handle  the  calls.  As  the 
number  of  subscribers  and  of  calls  increases,  this  demand 
upon  the  operator  becomes  such  that  each  must  be  given 
fewer  and  fewer  lines  to  attend,  especially  if  their  lines 
are  frequently  used,  so  that  where  one  girl  might  in  the 
early  stages  of  telephone  development  easily  attend  to 
100  or  even  150  lines,  a  point  is  reached  where  a  girl 


The  Rural  Telephone  307 

may  have  all  that  she  can  possibly  do  to  satisfy  60  sub- 
scribers. 

"These  facts  make  it  apparent  that  as  a  telephone  sys- 
tem grows  the  cost  grows  likewise,  and  all  through  the 
country  the  farmers  have  found  themselves  obliged,  in 
order  to  keep  up  their  plant  and  furnish  the  kind  of  service 
which  they  feel  they  want,  to  increase  their  assessments  in 
the  case  of  mutual  associations,  or  to  raise  their  rates  in 
the  case  of  the  incorporated  companies.  The  one  thing 
which  the  farmer  has  often  failed  to  see  is  that  with  this 
increase  in  cost  has  come  a  great  increase  in  the  value  of 
the  service.  When  he  was  able  to  reach  only  a  dozen 
neighbors,  and  was  not  connected  with  any  village,  the 
service  was  of  value  to  him,  but  still  not  of  great  value. 
After  he  was  connected  to  the  nearest  village  exchange, 
and  was  able  to  reach  300  subscribers,  the  service  became 
immensely  more  valuable,  and  this  service  he  still  obtained 
for  a  minimum  of  cost.  As  the  country  filled  up  and  the 
number  of  people  connected  with  his  telephone  system 
increased  up  to  the  thousands,  while  the  cost  to  him  may 
have  increased  a  few  dollars  a  year,  still  the  increase  in 
the  value  of  the  service  which  resulted  from  the  fact  that 
it  reached  so  many  more  persons  was  many  times  greater 
than  the  small  additional  expenditure  required  of  him. 
In  actual  dollars  and  cents  the  additional  profits  which 
the  farmer,  in  selling  his  products,  may  make  on  a  single 
transaction  through  having  the  facilities  of  quick  com- 
munication with  the  trading  centers  would  in  many  cases 
suffice  to  pay  the  cost  of  a  telephone  for  his  entire  lifetime." 


CHAPTER  XIII 
MUTUAL  INSURANCE 

The  cooperative  method  of  conducting  business  is 
applied  extensively  to  rural  insurance.  The  mutual 
insurance  companies  sometimes  cover  a  state,  but  more 
often  are  confined  to  a  county  or  township.  There  were 
fifteen  hundred  town  and  mutual  companies  in  the  United 
States  in  1911.  The  mutual  companies  are  formed  by 
groups  of  farmers  or  property-owners  to  insure  themselves 
against  fire  and  lightning,  tornadoes,  cyclones,  wind- 
storms, hailstorms,  and  against  the  loss  of  stock,  the 
insurance  to  be  done  at  actual  cost.  In  Europe  the  in- 
surance of  cattle  against  death  from  diseases  and  the 
insurance  of  persons  engaged  in  agricultural  work  have 
developed  into  large  undertakings.  The  expenses  of  these 
companies  are  low.  They  pay  comparatively  small  sala- 
ries to  the  management,  the  rents  for  quarters  are  low, 
and  all  of  the  operations  are  conducted  economically. 
The  stock  corporation  companies,  on  the  other  hand,  are 
conducted  on  a  much  more  elaborate  and  expensive  scale, 
and  the  farmer  who  insures  his  property  through  them 
therefore  pays  a  relatively  higher  insurance  rate,  the 
premiums  generally  amounting  to  three  or  four  times  as 
much  as  the  premiums  or  assessments  charged  by  the 
mutual  companies.  The  farmers  of  Minnesota,  for  ex- 
ample, according  to  Mr.  Valgren,  through  their  mutual 

308 


Mutual  Insurance  309 

companies  are  saving  three-quarters  of  a  million  dollars 
annually  in  premiums.  The  Minnesota  Act  authorizing 
the  formation  of  township  mutual  insurance  companies 
was  passed  in  1875,  and  of  the  one  hundred  and  fifty  or 
more  associations  formed  since  that  time,  none  has  failed.^ 
The  formation  and  management  of  the  mutual  com- 
panies must  conform  to  the  insurance  laws  of  the  state, 
the  mutual  companies  being  subject  to  the  same  super- 
vision as  that  exercised  over  the  stock  corporation  insur- 
ance companies.  In  forming  a  mutual  company,  a  group 
of  farmers  or  other  property-owners  residing  in  the  same 
town  or  county  or  in  a  number  of  adjoining  towns  who  own 
collectively  from  $50,000  to  $250,000  worth  of  property, 
or  whatever  amount  is  prescribed  by  the  state  law,  form 
themselves  into  a  company  or  corporation  for  mutual 
insurance  against  fire,  hail,  cyclone,  or  against  such  other 
catastrophes  as  the  state  laws  provide.  When  agreements 
have  been  entered  into  for  insurance  by  the  number  of 
people  prescribed  by  the  law,  usually  twenty-five  or  more, 
and  a  certain  proportion  of  the  premiums  are  actually 
paid  in,  and  the  remainder  secured  by  notes  or  bonds  in 
the  possession  of  the  association,  the  company  takes  out  a 
certificate  of  incorporation,  and,  after  approval  by  the 
state  officials,  is  ready  to  transact  a  mutual  insurance 
business. 

A  PLAN  FOR  A  MUTUAL  INSURANCE  COMPANY 

There  are  two  methods  of  organizing  mutual  insurance 
companies.     In  one  of  these  a  fixed  premium  is  charged 

•  "  Farmers'  Mutual  Fire  Insurance  in  Minnesota,"  Victor  Nelson  Val- 
gren,  Quarterly  Journal  of  Economics,  Harvard  University,  Feb.,  1911. 


310  Cooperation  in  Agriculture 

to  all  those  who  msure,  somewhat  after  the  plan  of  the 
old-line  companies.  From  these  premiums  a  surplus  is 
accumulated  from  which  the  losses  are  paid,  and  when 
the  surplus  is  not  large  enough  to  cover  losses,  the  members 
are  assessed  pro  rata  to  cover  the  losses.  In  the  second 
method,  no  premium  is  paid  upon  the  insurance,  but  a  fee 
is  collected  at  the  time  a  policy  is  issued  to  cover  the  cost 
of  examining  the  property  and  other  expenses  in  connec- 
tion with  issuing  the  policy.  The  members  are  under  a 
written  agreement  to  pay  a  pro  rata  share  of  the  loss  sus- 
tained by  the  company  whenever  a  loss  occurs. 

In  some  states  each  company  has  to  provide  and  main- 
tain as  a  reinsurance  reserve  a  fund  equal  to  a  certain  pro- 
portion of  the  amount  received  annually  from  premiums. 
This  provision  applies  especially  to  the  state  mutuals. 
Under  the  first  method  of  organization,  in  addition  to  the 
annual  premium  a  member  pays,  he  may  be  legally  liable 
to  the  association  for  a  still  greater  amount  when  unusual 
losses  occur,  in  Iowa,  for  example,  the  maximum  liability 
of  a  member  equaling  not  "less  than  a  sum  equal  to  the 
basis  rate  charged  by  the  association  for  insurance  nor 
greater  than  a  sum  equal  three  times  such  basis  rate." 
In  other  states  each  member  by  agreement  may  be  liable 
for  his  pro  rata  share  of  all  the  liabilities  carried  by  the 
company,  the  maximum  amount  of  the  liability  usually 
being  plainly  stated  on  the  face  of  each  policy.  When  a 
loss  occurs,  the  extent  of  the  loss  is  determined  by  the 
company,  and  the  amount  is  paid  from  the  assessment 
or  from  the  reserve  fund. 

One  may  gain  an  idea  of  the  extent  of  the  mutual  in- 
surance business  from  the  annual  reports  of  the  state  in- 


Mutual  Insurance  311 

surance  officials,  there  being,  for  example,  one  hundred 
and  fifty  township  mutual  fire  insurance  companies  in 
Minnesota  in  1911  and  seven  mutual  hail  and  cyclone  in- 
surance companies.  The  insurance  in  force  in  the  town- 
ship mutual  fire  insurance  companies  at  the  end  of  1911 
.was  $295,219,952.  The  amount  in  force  in  the  mutual 
hail  associations  was  $6,145,340,  and  in  the  mutual  cy- 
clone companies,  $38,278,197.^  In  Iowa  in  1911  there 
were  nineteen  state  mutual  fire  insurance  companies, 
one  hundred  and  fifty-three  county  mutual  fire  companies, 
nine  exclusive  hail  insurance  companies,  and  one  mutual 
tornado  company.  The  risks  written  by  the  Iowa  state 
and  county  mutual  assessment  associations  in  1911 
amounted  to  $175,718,435,  the  losses  paid  $1,235,637.12, 
and  the  risks  in  force  $653,324,809.2 

THE  STRENGTH  OF  THE  MUTUAL  INSURANCE  ASSOCIA- 
TIONS 

The  strength  of  the  mutual  insurance  companies,  like 
any  other  cooperative  business  enterprise,  lies  in  the  ac- 
quaintance of  the  members  with  each  other,  the  restricted 
area  in  which  they  operate,  the  care  with  which  the  haz- 
ards can  be  determined  and  the  policies  issued.  The 
weakness  lies  in  their  inability  to  pay  the  losses  whenever 
a  very  general  disaster  occurs  on  account  of  the  small 
volume  of  business,  the  small  assets,  and  the  inability  to 
collect  assessments  from  the  members.     There  is  a  large 

1  Preliminary  Fire  Report,  Department  of  Insurance  for  the  year  end- 
ing December  31,  1911. 

2  Forty-third  Annual  Report  of  the  Auditor  of  State  of  Iowa,  on  In- 
surance, p.  viii. 


312  Cooperation  in  Agriculture 

moral  element  in  all  kinds  of  insurance.  In  the  town  and 
county  mutuals,  the  moral  risk  is  very  low  because  the 
intimate  acquaintance  of  the  members  insures  against 
the  overvaluation  of  property  and  the  issuing  of  policies 
to  dishonest  people,  and  it  prevents  dishonest  practices 
which  a  person  might  engage  in  when  dealing  with  the 
large  insurance  corporations  located  at  a  distance.  Many 
of  the  states  safeguard  the  mutual  associations  against 
losses  that  might  occur  from  unusual  conflagrations  by 
prohibiting  their  operation  in  the  larger  villages  and  cities, 
by  confining  their  operation  to  restricted  territories  such 
as  a  single  town  or  county  or  at  most  to  a  small  number  of 
towns  or  counties,  and  by  restricting  their  operations  to 
non-hazardous  risks.  The  kinds  of  property  that  can 
be  insured  by  a  mutual  insurance  association  is  usually 
defined  by  law,  in  Minnesota  the  statute  providing :  — 

"Nor  shall  any  township  mutual  fire  insurance  com- 
pany insure  any  property  other  than  dwellings  and  their 
contents,  farm  buildings  and  their  contents,  live-stock, 
farm  machinery,  hay,  grain,  in  the  bin  or  stack,  churches, 
schoolhouses,  society  and  town  halls,  country  blacksmith 
shops  and  their  contents,  parsonages  and  their  contents, 
and  the  bams  and  contents  used  in  connection  there- 
with, butter-makers'  dwelling  houses  and  contents,  and 
bams  and  contents  used  in  connection  therewith. 

"No  such  company  shall  insure  any  property  within 
the  limits  of  any  city  or  village  except  that  located  upon 
lands  actually  used  for  farming  or  gardening  purposes, 
but  whenever  the  dwelling  house  of  any  person  insured 
is  within  the  limits  of  a  town  where  the  company  is  au- 
thorized to  do  business,  and  the  farm  on  which  such  dwell- 


Mutual  Insurance  313 

ing  is  situated  is  partly  within  and  partly  without  such 
town,  it  may  include  in  such  insurance  any  outbuildings, 
hay,  grain,  stock,  or  other  farm  property  on  such  farm 
outside  such  limits." 

STATE  MUTUAL  ASSOCIATIONS 

The  mutual  assessment  associations,  like  other  co- 
operative businesses,  begin  to  lose  in  safety  and  strength 
when  they  attempt  to  operate  as  state  mutuals  or  in 
other  large  geographical  areas.  Under  these  conditions 
the  personal  contact  and  acquaintance  of  member  with 
member  are  weakened,  the  risks  cannot  have  the  personal 
examination  that  local  mutuals  give,  the  powers  of  the 
association  have  to  be  delegated  to  employees  or  agents, 
the  moral  hazard  increases,  and  the  assessments  are  likely 
to  grow  in  number  and  in  size.  While  some  of  the  state 
mutuals  are  successful,  their  general  condition  compares 
unfavorably  with  that  of  the  local  associations.  The 
status  of  the  state  mutuals  is  set  forth  by  Mr.  Solomon 
S.  Huebner  of  the  Wharton  School  of  Finance  and  Com- 
merce of  the  University  of  Pennsylvania,  to  whom  the 
author  is  indebted  for  many  of  the  points  of  view  in  this 
chapter,^  as  follows :  — 

"Many  attempts  have  been  made,  usually  with  un- 
successful results,  to  apply  the  mutual  plan  of  fire  insur- 
ance over  one  or  more  states.  But  these  state  mutuals, 
while  retaining  the  objectionable  features  of  the  local 
mutuals  —  namely,  lack  of  assets,  small  volume  of  busi- 
ness, and  assessments  —  also  lack  their  elements  of 
strength.     The  moral  hazard  is  increased  as  the  terri- 

'  "  Property  Insurance,"  pp.  60-61,  1911. 


314  Cooperation  in  Agriculture 

tory  within  which  a  mutual  company  does  business  in- 
creases. When  such  mutuals  attempt  to  write  insurance 
throughout  an  entire  state,  they  necessarily  come  into  com- 
petition with  the  wealthier  and  more  firmly  established 
stock  companies,  and  cannot  secure  business  except  at 
inadequate  premiums.  They  also  lack  the  business  or- 
ganization and  the  trained  staff  of  experts  possessed  by 
the  stock  companies,  and  to  secure  business  in  sections 
far  removed  from  the  home  office,  must  depend  upon 
agents  for  the  soliciting  of  insurance  and  the  selection  of 
risks.  The  result  is  that  the  service  is  not  of  the  best, 
and  the  supervision  over  the  selection  of  risks  is  woefully 
inferior  to  that  of  the  local  companies. 

"As  long  as  the  company  grows  and  policy-holders 
are  not  called  upon  to  pay  assessments,  the  management 
hears  few  complaints,  and  few  members  find  occasion  to 
trouble  themselves  about  its  affairs.  The  officers  in  too 
many  instances  ambitiously  strive  to  rapidly  increase 
their  business,  and  in  doing  so  depend  upon  agents,  whose 
interest  it  is  to  write  as  much  insurance  as  possible.  But 
in  the  course  of  time  the  poor  selection  of  risks  begins  to 
bear  fruit.  The  low  premiums  are  found  woefully  inade- 
quate, and  assessment  after  assessment  must  be  collected 
from  the  policy-holders  to  meet  the  ever-increasing  claims. 
It  is  then  that  the  policy-holders  begin  to  rebel  against 
what  they  regard  as  unreasonable  charges.  As  the  claims 
against  the  company  become  more  pressing,  it  in  turn 
must  resort  to  pressure,  and  even  litigation,  to  collect  the 
assessments,  and  then  follows  wholesale  withdrawals 
and  at  last  bankruptcy. 

"This  has  been  the  story  of  the  great  majority  of  state 


Mutual  Insurance  315 

mutuals.  By  extending  their  activities  over  too  large  a 
territory,  personal  supervision  could  not  be  exercised  over 
the  risks  accepted,  and  powers  delegated  to  employees 
were  too  often  abused  or  inefficiently  exercised.  The  rates 
were  too  low  and  the  hazardous  risks  too  many,  and  the 
result  could  not  be  other  than  failure.  We  are  informed 
that  at  a  recent  date  only  two  or  three  out  of  the  seventy- 
four  state  mutuals  in  New  York  in  1853  were  still  in  exist- 
ence. To  insure  their  greater  safety,  a  number  of  states 
have  passed  laws  with  special  reference  to  their  organiza- 
tion and  operation.  The  number  of  applications  for  in- 
surance which  must  be  in  hand  before  their  organization 
is  perfected  is  usually  much  larger  than  is  required  for 
local  mutuals.  The  class  of  business  which  they  may  ac- 
cept is  carefully  limited  in  certain  states,  while  in  others 
a  limit  is  placed  upon  the  amount  of  insurance  which  may 
be  written  on  any  one  risk." 


BIBLIOGRAPHY 

The  following  list  includes  the  leading  references  to  the  various 
forms  of  cooperation  outlined  in  the  foregoing  pages  :  — 

Adams,  E.  W.  "The  Modern  Farmer."  W.  J.  Stone  Com- 
pany, San  Francisco,  1899. 

Aiken,  D.  W.  The  Grange,  its  origin,  progress,  and  educational 
purposes.    Washington,  Government  Printing  Office,  1883. 

Albertson,  H.  H.  "Among  the  Farmers  of  the  Central  West," 
Arena,  May,  1908,  V.  39 :  632-635.  "Cooperative  Farmers 
in  Politics,"  Arena,  June,  1908,  V.  39  :  763-766. 

Aves,  Ernest.  "Cooperative  Industry."  London  :  Methuen  & 
Co.,  1907. 

Bailey,  L.  H.,  ed.  "Cooperative  Marketing  in  Fruits,"  Cy- 
clopedia of  American  Agriculture,  Vol.  IV,  pp.  265-267. 
New  York,  1909. 

Chapter   on  Community  Action  in  "The  Country-Life 

Movement."     New  York,  1911. 

Barrett,  Charles  Simon.  "The  Mission,  History,  and  Times  of 
the  Farmers'  Union."  Marshall  &  Bruce  Co.,  Nashville, 
Tenn. 

Bemis,  E.  W.,  Cooperation  in  New  England,  Publications  of 
American  Economic  Association,  Vol.  I,  No.  5.  Baltimore, 
Guggenheimer,  Weil  and  Co.,  1886. 

Bliss,  R.  K.  Iowa  Extension  Bulletin,  7.  "  Cooperative  Cow- 
Testing  Associations  in  Iowa." 

Brand,  R.  E.     (See  Eraser.) 

Brown,  W.  H.  "Cooperative  Agriculture."  (In  Bliss,  W.  D.  P., 
ed.  New  Encyclopedia  of  Social  Reform,  pp.  305-306. 
New  York,  1908.) 

BuGBY,  M.  O.     (See  Goddard.) 

Bush,  C.  R.     (See  BUss.) 

317 


318  Bibliography 

BuTTERFiELD,  K.  L.    Chapters  in  Rural  Progress.     Chicago, 

University  of  Chicago  Press,  1908. 
Card,  F.  W.     "  Cooperative  P^e  Insurance  and  Telephones." 

(In  Bailey,  L.  H.,  ed.     Cyclopedia  of  American  Agriculture, 

Vol.  IV,  pp.  303-306.     New  York,  1909.) 
Chandler,  W.  H.  !'  Cooperation  among  Fruit-Growers."    Bulle- 
tin 97,  University  of  Missouri,  College  of  Agriculture,  1911. 
Committee   on  Agriculture,  Cooperative   Land-Mortgage 

Banks,  Hearingfs,  May  29, 1912.    Senate  Joint  Resolution  75. 
Commissioner  of  Corporations,  on  Cotton  Exchanges,  Report 

of  the. 
Coulter,  J.  L.,  and  Morman,  J.  B.     "Cooperation  in  the  Mar- 
keting of  Farm  I*roduce,"     American  Economic  Association 

Quarterly,  S.  3 ;   V.  10,  1,  pp.  25&-274.     1909. 
"Economic  Organization  of  Rural  Lofe,"  r*roceedings  of 

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1910. 

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TousLEY,  B.  M.    "Cooperation  among  Farmers."    1910.   16  pp. 

Whitelt,  C.  F.     (See  "Ottawa"  under  "General.") 

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Bibliography  323 

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Cow-testing  Associations.  Circular  179,  May  1, 1911.  H.  Rabild. 

Iowa  Extension  Bulletin  7.  "Cooperative  Cow-testing  As- 
sociations in  Iowa,"  by  R.  K.  Bliss,  C.  R.  Bush,  and  H.F. 
Luick ;   Ames,  Iowa;   April,  1911. 

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Michigan  Dairy  and  Food  Department.  Bulletins  137, 155, 179 ; 
Lansing,  January,  1907-July,  1910. 

"  The  Wisconsin  Dairy  Cow  Competition,"  F.  W.  Woll,  Decem- 
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Commissioner's  Branch,  BiiUetins  4,  5,  and  12.  October, 
1910,  Ottawa,  Canada. 

Creameries 

Bureau  of  Animal  Industry,  Bulletin  10,  U.  S.  Department  of 
Agriculture.  Minnesota  Agricultural  Experiment  Station, 
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Dairying 

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October,  1909.  Illinois  Agricultural  Experiment  Station,  Bul- 
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Ohio  Agricultural  Experiment  Station,  Wooster,  Ohio,  March  1, 
1910.  Circular  99.  "  Cooperative  Dairy  Work,"  by  L.  H. 
Goddard  and  M.  O.  Bugby. 

Dean,  H.  H.  "Canadian  Dairying,"  Toronto,  W.  Briggs,  1906, 
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24,  1910. 


INDEX 


Abuses  in  fruit  trade,  206. 
Associated  methods  of  selling  fruit, 

235. 
Auction  company,  202. 

Bank  credit,  282. 

Banking  systems  for  rural  credit, 
271. 

Bibliography,  317. 

Boll  weevil,  183. 

Breeders'  and  growers'  associations, 
87. 

Brokers,  fruit,  199. 

Business  system  for  cooperative 
creameries,  148. 

Butter,  cooperation  in  the  manu- 
facture of,  135. 

By-laws  of  a  citrus  fruit  associa- 
tion, 55. 

California  Fruit-growers'  Exchange, 
241. 

California  law  relating  to  coopera- 
tive associations,  46. 

Carey  Act  enterprises,  258. 

Cattle-breeding,  cooperative,  95. 

Centralizer  creameries,  146. 

Central  packing-house  for  fruit,  226. 

Changes  in  industrial  methods,  1. 

Changes  in  labor  methods,  3. 

Charter  of  a  citrus  fruit  associa- 
tion, 52. 

Citrus  distribution,  cooperative 
methods,  247. 

Citrus  fruit  association,  charter  of, 
52. 

Citrus  fruit  membership  agreement, 
32. 


Citrus  fruits,  remedy  for  decay  in, 
216. 

Citrus  fruits  of  California,  239. 

Citrus  Protective  League  of  Cali- 
fornia, 75. 

Cold-storage  for  fruits,  231. 

Commission  merchant,  201. 

Company  system  of  horse-breeding, 
106. 

Constitution  and  by-laws  of  a 
farmers'  elevator  company,  132. 

Cooperative  fruit  associations,  212. 

Cooperative  organization  of  a 
federation,  67. 

Corn-breeding  associations,  112. 

Corporations  for  distributing  fruit, 
200. 

Cost  of  credit  to  the  American 
farmer,  277. 

Cotton,  acreage  of,  188. 

Cotton,  distribution  of,  184. 

Cotton,  price  of,  188. 

Cotton  crop,  annual,  182. 

Cotton  industry,  cooperation  in, 
182. 

Cow-testing  associations,  coopera- 
tive, 89. 

Creamery,  the  American,  status  of, 
144. 

Creamery,  organization  of,  137. 

Credit,  cost  of,  to  the  American 
farmer,  277. 

Credit,  rural,  271. 

Credit  unions,  cooperative,  274. 

Credit  unions,  Jewish,  274. 

Crop  improvement,  cooperative, 
109. 

Crop  lien,  279. 


325 


326 


Index 


Dairy  federation,  cooperative,  152. 
Danish  cattle-breeding  associations, 

95. 
Danish  cow-testing  associations,  89. 
Dishonest   commission   merchants, 

208. 
Dissatisfaction  among  farmers,  10. 
Dividends,  payment  of,  83. 

Economic  mistakes  of  cotton- 
growers,  195. 

EfiForts  towards  organization,  11. 

Egg  business,  161. 

Eggs,  cooperation  in  handling,  in 
other  countries,  177. 

Eggs,  marketing,  through  the 
creamery,  168. 

Elevators,  grain,  farmers'  coopera- 
tive, 122. 

Farmers'  Union,  185. 

Farm  products,  cooperative  dis- 
tribution and  sale,  120,  248. 

Federation  of  cooperative  associa- 
tions, 64. 

Fertilizers,  commercial,  restriction 
in  use  of,  195. 

Financing  a  cooperative  organ- 
ization, 78. 

Fortier,  Samuel,  259. 

Fruit,  cooperation  in  handling,  dis- 
tributing, and  sale  of,  197. 

Fruit,  distribution  of,  198,  234. 

Fruit  rots,  213. 

Fruit  trade,  abuses  in,  206. 

Fruit  trade,  retail,  204. 

Fruit-growers'  supply  company, 
254. 

Fundamentals  in  codperation,  18. 

Grading  fruit,  218. 

Grain-distributing  system,  123. 

Grain  elevators,  farmers'  coopera- 
tive, 122. 

Growers'  and  breeders'  associations, 
87. 


Handschin,  W.  F.,  99. 
Harvesting   fruit,    cooperation    in, 

215. 
Herrick,  Ambassador,  273,  292. 
Hood  River  Apple-growers'  Union, 

221. 
Horse-breeding,  cooperative,  105. 
Huebner,  S.  S.,  313. 

Illinois  Corn-breeders'  Association, 

115. 
Individual  credit  system,  278. 
Industrial  methods,  changes  in,  1. 
Insurance,  mutual,  308. 
Irrigation,  codperation  in,  258. 

Jewish  Agricultural  and  Industrial 

Aid  Society,  274. 
Jewish  credit  unions,  274. 
Jobbers,  fruit,  201. 
Jordan,  Harvie,  188. 

Labor  methods,  changes  in,  3 

Landschaften,  271,  291. 

Legal  features  of  cooperative  organ- 
izations, 40. 

Live-stock,  cooperative  breeding  of, 
94. 

Lorenzoni,  Doctor,  272,  285. 

Loss,  economic,  in  rural  efficiency. 


Management  of  cooperative  organ- 
izations, 36. 

Membership  in  a  farmers'  organiza- 
tion, 25. 

Milk,  cooperation  in  distribution 
and  sale  of,  153. 

Milk  producers,  organization  of, 
156. 

Minimum  price  of  cotton,  190. 

Minnesota,  cooperative  cattle- 
breeding  in,  99. 

Mormon  colonies,  irrigation  by, 
259. 

Mutual  insurance,  308. 


Index 


327 


National  League  of  Commission 
Merchants,  208. 

Nebraska  law  relating  to  coopera- 
tive associations,  46. 

New  York  Dairymen's  League,  159. 

Organization,  efforts  towards,  11. 
Organization  of  a  farmers'  coopera- 
tive association,  52. 

Packing  fruit,  218. 

Pennington,  Miss.,  161. 

Perishable  fruit,  selling  of,  237. 

Pierce,  Mr.,  161. 

Political  questions,  73. 

Pooling  fruit,  227. 

Price  of  fruit,  fixing  a,  246. 

Prosperity  of  the  American  farmer, 

6. 
Public  policy  questions,  73. 
Purchase   of   supplies,    cooperation 

in,  250. 

Raiffeisen  banks,  271,  286. 
Remedy  for  decay  in  citrus  fruits, 

216. 
Retail  fruit  trade,  204. 
Rommel,  G.  M  ,  106. 
Rot  of  fruits,  213. 


Rural  credit,  271. 

Rural  efficiency,  economic  loss  in, 

8. 
Rural  telephone,  299. 

Schulze-Delitzsch  banks,  271,  290. 
Slocum,  Mr.,  166. 
Southern  Cotton  Association,  185. 
Store  Credit  system,  280. 
Supplies,   cooperation  in  purchase 

of,  250. 
Supply  company,  organization  of, 

250. 

Tait,  C.  E.,  261. 
Teele,  R.  P.,  258. 
Telephone,  rural,  299. 

Voting  power  of  members  of 
farmers'  organizations,  27. 

Warehouseman,  203. 

Warehouses  for  cotton,  190. 

Water  companies  in  Southern 
California,  261. 

Wisconsin  cattle-breeding  associa- 
tions, 98. 

Wisconsin  law  relating  to  coopera- 
tive associations,  45. 


Printed  in  the  United  States  of  America. 


'HE  following  pages  contain  advertisements  of  a 
few  of  the  Macmillan  books  on  kindred  subjects 


Latest  Additions  to  the 

RURAL  SCIENCE  SERIES 
Edited  by  Professor  L.  H.  BAILEY 

Director  of  the  New  York  State  School  of  Agriculture  at  Cornell  University 

Sheep  Farming 

By  JOHN  A.   CRAIG  and  F.   R.   MARSHALL 

Illustrated,  cloth,  ismo,  $i,jo 

This  book  deals  with  sheep  husbandry  as  a  phase  of  intensive 
forming.  Recognizing  that  it  is  likely  to  be  used  by  persons 
unfamiliar  with  sheep,  the  authors  have  worked  from  the  stand- 
point of  the  producer  of  the  market  stock  rather  than  from  the 
standpoint  of  the  professional  breeder.  The  various  breeds  are 
discussed  in  such  a  way  as  to  enable  the  reader  to  select  the 
kind  that  is  most  likely  to  do  well  under  his  conditions  and  to 
acquaint  him  with  the  care  it  is  accustomed  to  and  needs.  The 
management  of  the  flock  in  the  fall,  winter,  spring,  and  summer 
seasons,  the  formation  of  the  flock,  the  selection  of  foundation 
stock,  and  the  means  of  maintaining  a  high  standard  of  flock 
efficiency  are  all  discussed  in  subsequent  chapters. 

Principles  of  Fruit  Growing 

By  Professor  L.   H.  BAILEY 

JVew  edition^  cloth^  igtno,  fi.jo 

Since  the  original  publication  of  this  book,  in  1897,  it  has  gone 
through  many  editions.  The  progress  of  fruit  growing  in  the 
meantime  has  been  very  marked  and  it  has  been  necessary  to 
completely  rewrite  the  work.  The  present  issue  of  it  brings 
the  accounts  of  the  new  practices  and  discoveries  as  they  relate 
to  fruit  growing  up  to  date.  All  of  the  text  and  practically  all 
of  the  illustrations  are  new. 


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RURAL  SCIENCE  SEKiES— Continued 


Farm  Forestry 

By  E.   G.   CHEYNEY 

Illustrated,  cloth,  jzmo,  $1.^0 

This  book  deals  with  the  place  of  the  wood  lot  or  farm  forest 
in  the  scheme  of  farming,  with  the  planting,  care,  and  harvest- 
ing of  timber  on  lands,  with  the  different  species  of  trees  that 
may  be  used,  their  relations  or  associations  in  a  forest  planta- 
tion, the  rate  of  growth,  the  profits  to  be  expected,  and  the  prin- 
cipal difficulties  that  are  usually  encountered.  It  is  profusely 
illustrated. 

Forage  Crops  for  the  South 

By  S.   M.  TRACY 

Illustrated,  cloth,  izmo,  $/.jo 

Professor  Tracy  has  had  long  experience  in  Southern  agricul- 
ture, both  in  application  and  in  teaching.  He  was  formerly 
Professor  of  Agriculture  in  the  Mississippi  Agricultural  College, 
and  now  conducts  a  branch  station  or  farm  for  the  United 
States  Department  of  Agriculture.  He  is  a  botanist  of  note 
and  has  traveled  extensively  in  the  South  as  a  collector.  His 
book  is  not  only  authentic,  but  practical.  In  it  is  contained  a 
discussion  of  all  kinds  of  plants  and  crops  adapted  to  the  South- 
ern States  for  fodder,  soiling,  pasturing,  and  hay.  The  text  is 
abundantly  illustrated. 


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RURAL  SCIENCE  SERIES  —  Cbn^naecf 

Fruit  Insects 

By  M.  V.  SLINGERLAND  and  C.  R.  CROSBY 

Illtistrated,  cloth,  j2mo,  $/.jo 

This  is  a  practical  account  of  the  principal  insects  in  this  coun- 
try which  attack  the  different  kinds  of  fruits  —  trees,  fruits, 
small  fruits,  cranberries,  grapes,  and  the  like.  It  presents  a 
full  but  brief  outline  life  history  of  the  leading  insects  together 
with  the  methods  of  control. 

Milk  and  Its  Products 

By  HENRY  H.  WING 

Professor  of  Dairy  Husbandry  in  Cornell  University 
//ew  Revised  Edition,  with  new  illustrations,  cloth,  i2mo,  $i.jo 

The  revolution  in  dairy  practice,  brought  about  by  the  introduc- 
tion of  the  centrifugal  cream  separator  and  the  Babcock  test  for 
fat,  by  a  more  definite  knowledge  regarding  the  various  fermen- 
tations that  so  greatly  influence  milk,  and  the  manufacture  of  its 
products,  have  demanded  the  publication  of  a  book  that  shall 
give  to  the  dairyman,  and  particularly  to  the  dairy  student,  in 
simple,  concise  form,  the  principles  underlying  modern  dairy 
practice.  Such  has  been  Professor  Wing's  purpose  in  this 
work.  This  is  not  a  new  edition  of  the  author's  very  successful 
volume  published  under  the  same  title  many  years  ago  ;  it  is,  in 
reality,  an  entirely  new  book,  having  been  wholly  reset  and  en- 
larged by  the  addition  of  new  matter,  both  text  and  illustra- 
tions. The  author's  aim  has  been  at  all  times  to  give  the  pres- 
ent state  of  knowledge  as  supported  by  the  weight  of  evidence 
and  the  opinions  of  those  whose  authority  is  highest. 


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RURAL  SCIENCE  SERIES 

Edited  by  L.  H.  BAILEY 


On  Selection  of  Land,  etc. 

Isaac  P.  Roberts'  The  Farmstead $1  60 

On  Tillage,  etc. 

F.  H.  King's  The  SoU 1  60 

Isaac  P.  Roberts'  The  Fertility  of  the  Land         .       .       .  1  60 

F.  H.  King's  Irrigation  and  Drainage 1  60 

Edward  B.  Voorhees'  Fertilizers 1  25 

Edward  B.  Voorhees'  Forage  Crops 1  50 

J.  A.  Widtsoe's  Dry  Farming 1  60 

L.  H.  Bailey's  Principles  of  Agriculture        ....  1  25 

On  Plant  Diseases,  etc. 

E.  C.  Lodeman's  The  Spraying  of  Plants     .       .       .       .  1  26 

On  Garden-Making 

L.  H.  Bailey's  Garden-Making 1  60 

L.  H.  Bailey's  Vegetable-Gardening 1  50 

L.  H.  Bailey's  Forcing  Book 1  25 

On  Fruit-Growing,  etc. 

L.  H.  Bailey's  Nursery  Book 1  60 

L.  H.  Bailey's  Fruit-Growing 1  60 

L.  H.  Bailey's  The  Pruning  Book 1  feO 

F.  W.  Card's  Bush  Fruits 1  60 


On  the  Care  of  Live-stock 

Nelson  S.  Mayo's  The  Diseases  of  Animals  . 

W.  H.  Jordan's  The  Feeding  of  Animals 

I.  P.  Roberts'  The  Horse  .        .        . 

M.  W.  Harper's  Breaking  and  Training  of  Horses 

George  C.  Watson's  Farm  Poultry. 


1  60 
1  50 
1  26 
1  60 
1  25 


On  Dairy  "Work,  Farm  Chemistry,  etc. 

Henry  H.  Wing's  Milk  and  Its  Products      ....  1  50 

J.  G.  Lipman's  Bacteria  and  Country  Life  ....  1  60 

On  Economics  and  Organization 

I.  P.  Roberts'  The  Farmer's  Business  Handbook        .       .  1  25 

George  T.  Fairchild's  Rural  Wealth  and  Welfare        .        .  1  25 

H.  N.  Ogden's  Rural  Hygiene 1  50 

J.  Green's  Law  for  the  American  Farmer      ....  1  60 


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Latest  Additions  to  the 

RURAL  TEXTBOOK  SERIES 
Edited  by  Professor  L.  H.  BAILEY 

Director  of  the  New  York  State  School  of  Agriculture  at  Cornell  Universi^ 


Farm  Management 


By  G.   F.   warren,  Ph.D. 

Professor  of  Farm  Management  in  the  College  of  Agriculture 

at  Cornell  University 

Illustrated^  cloth,  i2mo ;  $i.7J 

It  is  not  enough  for  the  former  to  secure  good  crops.  He  must 
secure  them  at  low  cost.  If  a  farm  is  to  bring  the  largest  finan- 
cial success,  it  must  be  efficiently  organized  and  managed.  In 
this  book  the  author  discusses  at  length  the  various  phases  of 
farm  efficiency.  Among  the  topics  treated  are  the  following: 
the  selection  and  purchase  of  a  farm  ;  the  selection  of  the  type 
of  farming  adapted  to  the  conditions ;  the  most  efficient  size  of 
farm  for  diflferent  kinds  of  farming;  the  horses  and  equipment; 
capital  and  its  proper  distribution  in  the  farm  business;  ways 
of  starting  farming  with  small  capital ;  methods  of  renting  farms 
with  their  advantages  from  the  standpoints  of  the  owner  and 
farmer ;  the  management  of  machinery,  horses,  and  men ;  field 
and  building  management ;  cropping  and  feeding  systems  ;  the 
marketing  of  farm  products ;  methods  of  keeping  form  records 
and  accounts. 

Obviously,  this  book  should  be  in  the  hands  of  every  farmer  or 
agricultural  student,  while  to  the  instructor  of  Farm  Manage- 
ment it  will  be  welcome  as  the  long-awaited,  and,  we  believe, 
the  only  satisfactory  textbook  for  use  in  a  long  or  short  course. 

inimal  Husbandry 

By  MERRITT  W.  HARPER 

Professor  of  Animal  Husbandry  in  the  New  York  State  College 

Ill-Uitrated,  cloth,  i2mo ;  preparing 

This  is  a  simple,  concrete  presentation  of  the  essential  facts  con- 
cerning form  animals,  adapted  for  use  in  secondary  schools. 


THE   MACMILLAN   COMPANY 

Publishers  64-66  Fifth  Avenue  New  Tork 


Latest  Additions  to  the 

RURAL  TEXTBOOK  SERIES 
Edited  by  Professor  L.  H.  BAILEY 

Director  of  the  New  York  State  School  of  Agriculture  at  Cornell  University 


Manures  and  Fertilizers 

By  H.  J.  WHEELER,  Ph.D.,  D.Sc. 

Formerly  Director  of  the  Rhode  Island  Elxperiment  Station 

Illustrated.     Cloth,  i2mo ;  preparing 

The  clear  and  unusually  full  discussion  of  the  practical  utilization  of 
manures  and  fertilizers  of  all  kinds,  and  of  their  relations  to  the  plant 
and  to  the  soil,  makes  this  book  not  only  an  excellent  text  for  college 
students,  but  also  one  which  will  be  generally  welcomed  by  all  up-to- 
date  agriculturists.  All  the  animal  manures,  litter,  and  waste  nitroge- 
nous materials  of  every  sort  are  discussed.  A  helpful  feature  for  the 
student  is  the  extended  treatment  of  the  availibility  of  organic  nitro- 
gen and  of  the  organisms  contained  in  barnyard  manure  which  give 
rise  to  the  various  fermentations  taking  place  therein.  The  well- 
known,  and  also  the  new,  nitrogenous  manures  such  as  calcium  cyan- 
amid  and  calcium  nitrate  are  considered  in  detail.  The  chapters  de- 
voted to  the  potash  salts,  phosphates,  lime,  magnesia,  soda,  gypsum, 
iron,  and  manganese  are  exceptionally  complete,  and  chlorin,  sulfur, 
silica,  carbon  disulfid,  toluene,  and  other  substances  exerting  catalytic 
and  other  effects  are  described.  Much  of  the  material  in  this  book 
which  will  be  new  to  students  and  other  readers  has  suggested  itself 
to  the  author  in  the  course  of  twenty-two  years  of  continuous  research. 

Animal  Husbandry  for  Schools 

By  MERRITT  W.   HARPER 
Professor  of  Animal  Husbandry  in  the  New  York  State  College 

Illustrated.     Cloth,  iztno ;  preparing 

This  is  a  simple,  concrete  presentation  of  the  essential  facts  concern' 
ing  farm  animals,  adapted  for  use  in  secondary  schools. 


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